Treasuries Reverse Course to End Higher
Prices recovered after Monday's post-G7 selloff, as the dollar stabilized. The Fed's Broaddus sounded less optimistic on the labor picture
Treasuries clawed their way back in light trade Tuesday as the dollar regained some equilibrium after the post-G7 sell-off. Supply and Fedspeak also featured, but did not have an adverse affect on prices. After a damp overseas session, U.S. stocks found favor again as the currency markets calmed and foreign exchange dealers braced for dollar intervention when the Tokyo market returns from the Autumnal Equinox holiday tonight.
Housing agency Fannie Mae launched a two-tranche $6.0 billion global 5-year and 10-year benchmark note offer and the Treasury confirmed that $25 billion 2-year notes, both of which will be auctioned Wednesday.
Richmond Fed president Broaddus agreed with his peers that the economic picture was brightening, but refused to rule out lower inflation and labor market slack, which could linger on through 2004. Broaddus was also confident that the Fed could maintain price stability through accommodative policy. From a typically hawkish voting member, this suggested that the Fed would hold rates low for some time. Dallas Fed's McTeer will speak from Honolulu, Hawaii, after hours.
The December bond closed up 20/32 at 108-23, while the 2-year note and 30-year bond spread narrowed 4 basis points to +344 basis points as the front-end underperformed ahead of Wednesday's supply.