Treasuries End Mixed

The Treasury curve reverted back to its steepening trend

With June fast approaching there was a very summer-like feel to the markets Tuesday, with the Treasury curve reverting back to its steepening trend and stocks pausing to refresh ahead of Fed Chairman Greenspan's Economic's Club speech Thursday.

Thus the June bond underperformed, but it was the drip feed of slow water torture to session lows of 100-08 rather than any watershed, while the front-end clawed back some recent weakness. In fact, the curve cement had already set in Asia, amid rumors of accounts there selling the long end. The 2s/30s spread widened back to +145 basis points from under +140 bp on Monday. One broker was rumored to have sold 5s for a leveraged account and one of the European leads/ co-leads on the Fannie Mae $5 bln issue (2s, 10s) was said to have dumped 2.5K June bonds, which may have been related.

Vols have generally drifted lower without any solid leads from Fedspeak, data, or stocks. Fed funds futures inched higher, with the July contract pricing 54% risk of a 25bp gentle tap on the gas in June. It'll take a break of Monday's 99-24 to 100-24 range to avoid another inside day Wednesday.

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