Treasuries End Higher

Argentina's currency woes, and comments from a Fed offical about the possibility of lower interest rates, pushed the market higher

Filling the data void, Treasuries made some solid upside progress Monday after being beaten down the first week of the year. Gains were most pronounced in the front end of the curve, though the bounty was shared right through to the back end. In the face of another tidal surge of announced corporate, supranational, sovereign and agency supply, prices held up remarkably well. The front-end was bolstered modestly by the 29% Argentine peso devaluation, and driven higher by dovish remarks from Atlanta Fed's Guynn who cast doubt on a quick economic recovery and said lower official rates were still a possibility.

Stocks duly turned lower on earnings doubts and bearish comments from a couple recovery nay-sayers. There was some good call and outright "black box" (leveraged) buying on 10-year notes and bonds, which supported the back end. Two-year notes gained 7/32 to 100-12, driving their yield down to 3.037%, while the cash bond gained nearly a point, yielding back under 5.5%. The March bond cracked through 101-02 Friday highs, closing up 1-7/32 at 101-15, and now faces 101-29 range top from last week.

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