Treasuries Close Mixed
Treasuries finished Tuesday's session mixed in price, taking most of their cues from a choppy stock market. Longer-dated securities continued to outperform as curve flattening trades remained intact for the third consecutive day.
Weakness in equities provided an early bid for Treasuries, but demand was concentrated in the back end as traders now prefer a little more yield relative to the safety of the front end (shorter-dated issues). A benign October CPI report was also a plus for the 30-year bond as the 0.3% rise in overall consumer prices and the 0.2% increase in the core rate (excluding food and energy) were well below what was feared after the 1.1% surge in the PPI last week.
Meanwhile the short end continued to lose steam as the Fed easing cycle is seen at an end. There was little commitment on the part of the bulls, however, and as soon as stocks began to reverse their declines, demand for bonds dried up.
Comments from Federal Reserve Chairman Greenspan's Q&A were interesting, but not market moving as he reiterated his JEC statement that the Fed is far from running out of ammo.
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