The Treasury market rose early this morning on the strength of an overnight Japanese rally and a nice performance by the dollar against the yen, but bonds have since retreated on thin volume. Later the

Treasury Department

will announce details of its upcoming two-year auction, but there's very little driving the market this morning.

"We've had a slow but steady rally since the employment report on the 5th, and traders were prepared to take some profits here," said John Canavan, Treasury market analyst at

Stone & McCarthy Research

in Princeton, N.J.

As of 10 a.m. EST,

GovPX

volume was down 31.7% when compared with the average first-quarter Wednesday last year. The 30-year Treasury bond lately was down 9/32 to trade at 96 15/32. The yield on the bond rose slightly, to 5.49%.

"Generally, two things determine where bonds are: a perception of change in

Fed

policy and a perception of change in inflation," said John Burgess, managing director and head of fixed-income at

Bankers Trust Global Investment Management

. "We don't expect any near-term inflation at all ... we're going to trade off little things like the dollar, corporate bond issuance and the hedging that goes on."

Today's little things are the dollar and the Japanese government market. Dollar/yen recovered from yesterday's low, and lately was up 0.72 to 118.14 yen. Haruhiko Kuroda, head of the international bureau at Japan's Ministry of Finance, said overnight that recent dollar/yen moves were "a little excessive."

Japanese futures rallied on news that Japan's

Ministry of Finance

is considering extending its Japanese government bond purchases through April, to keep long-term interest rates low. Officials said they had not yet reached a decision, the

Nihon Keizei Shimbun

reported. The original plan was for the ministry's

Trust Fund Bureau

to halt outright purchases of JGBs. This, along with the government's plan for a massive increase in JGB sales, was responsible for a major JGB selloff in January. Overnight, the yield on the 10-year JGB fell to 1.71% from 1.8%.

The

Robert Rubin

"take this job and shove it" watch continued in

The Wall Street Journal

this morning. The Treasury secretary is going to miss an economic meeting in Malaysia where he's usually a regular attendee, but his spokesman "rejected any suggestion" that this implies he's cleaning out his office, the

Journal

reported. It had the market's collective "tongues wagging," according to Canavan, but had no discernable effect on trading activity.

The Fed releases its

Beige Book

, an anecdotal survey of economic conditions in each Fed region, at 2 p.m.