The morning bloodbath in the stock market sent money flowing into Treasuries, dropping yields to their lowest levels in weeks. But like clockwork, as the major equity proxies clawed their way back to a semblance of normalcy, the Treasury market surrendered most of its gains to end only moderately higher.

There were no economic releases and no other market-moving events, and despite the big price swings, volume was pretty pathetic. Tracker

GovPX

saw just $28.4 billion change hands through 3 p.m. EST, 19.9% less than average for a Monday over the last month.

Following

last night's swoon in the Asian equity markets, which severely depressed U.S. stock futures before the open, the Treasury benchmarks rocketed to levels not seen in at least several weeks.

The 10-year note traded up as much as 26/32, dropping its yield as low as 6.277%, a level it hasn't closed below since Dec. 15. The five- and two-year notes and the 30-year bond saw yields they haven't seen in a little over two weeks.

But by the end of the day the gains had largely evaporated. The 10-year note ended up 6/32 at 101, trimming its yield 2.5 basis points to 6.362%. The shorter-maturity issues outperformed, as they typically do in a rally driven by stock-market losses. And the 30-year bond was up 5/32 at 101 5/32, lowering its yield 1.2 basis points to 6.164%.

At the

Chicago Board of Trade

, the June

Treasury futures contract gained 4/32 to 94 11/32.

"It's just a stock trade," said Ken Fan, bond strategist at

Paribas Capital Markets

. "In the morning, Treasuries were better because overnight Asian stocks really collapsed."

The effect was compounded, Fan said, by a sharp move out in swap spreads. A swap spread is the premium over a Treasury yield that that the payor of a fixed interest rate has to pay in order to swap it for a floating interest rate, and it is broadly indicative of willingness to take credit risk. Widening swap spreads mean less appetite for credit risk.

This morning, the benchmark 10-year swap spread widened to 110 basis points, its widest level since last summer, when the corporate bond market was flooded with new supply. "That was obviously a little bit of a concern, because swap spreads affect other fixed-income sectors and have been correlated to equity market performance," Fan said. "People sell swaps and credit products and put money into Treasuries."

By the end of the day, swap spreads had retreated back into their range. The 10-year spread was 4.75 basis points wider on the day at 108.75 basis points.

Economic Indicators

There were no economic releases today. This week's highlights are February

retail sales

tomorrow, the February

Producer Price Index

on Thursday and the February

Consumer Price Index

on Friday.

Currency and Commodities

The dollar weakened against the yen and the euro. It lately was worth 105.61 yen, down from 106.27 on Friday. The euro was worth $0.9641, up from $0.9628 on Friday. For more on currencies, please take a look at

TSC's

new

Currency Watch column.

Crude oil for April delivery at the

New York Mercantile Exchange

rose to $32.02 a barrel from $31.76 on Friday.

The

Bridge Commodity Research Bureau Index

rose to 215.91 from 214.06.

Gold for April delivery at the

Comex

rose to $291.50 an ounce from $290.00.