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Bond Focus: Stocks' Malaise Drags 10-Year Yield Below 6%

It was a reasonably subdued session for bonds, but a bit of positive influence from the poor action in equities this afternoon sent the benchmark 10-year note's yield below 6% in the last hour of trading before the 3 p.m. EDT futures close.

Excepting that, traders' were chiefly concerned with movements in the yield curve, as participants sold short-dated securities and bought long-dated securities in anticipation of upcoming supply on the short end, and buybacks on the long end.

The benchmark 10-year Treasury bond was up 13/32 to 103 22/32, dropping the yield up to 5.998%. The 30-year bond was higher, up 28/32 to 105 19/32, yielding 5.852%. The day's only major economic release was the international trade deficit, which -- surprise -- reached an all-time record of $29.2 billion in February. The market shrugged off the report, however.

Equity weakness in the afternoon was a marginal contributor to the strength in the long end of the bond market today. Early in the day, only the 30-year bond, which has been influenced by declining supply, was higher, but most maturities on the yield curve stabilized and rallied into the afternoon.

"There's some benefit flowing into bonds" from equity weakness, said Tony Crescenzi, chief bond market strategist at

Miller Tabak

. "The market's come to grips that the stock market has stabilized, and it's already factored in notion that stocks will be a little more stable, so I don't think that we're going to get too much more of a negative downdraft" when equities rally.

Meanwhile, the two-year Treasury note gained just 1/32 to 100 1/32, yielding 6.315%, narrowing the spread between two-year notes and bonds to 46 basis points in terms of yield, compared with 55 basis points one week ago.

The Treasury said today it will auction $12 billion at its regularly scheduled two-year note sale next week, and traders have begun selling the two-year to cheapen the note up. And they're buying long-dated securities, as the Treasury Department will buy back $2 billion in bonds with maturities ranging from 2020-25 tomorrow.

That amount, announced

yesterday, was a bit of a disappointment for a market expecting more in the way of buybacks, due to the heft of April tax receipts, but the bond has recovered somewhat today.

Economic Indicators

The international trade deficit widened to a record $29.2 billion in February, as imports increased 1.5% while exports fell 0.2%. On a year-over-year basis, exports are increasing -- up 9.5% -- but imports outpaced that, rising 18.8%.

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Currency and Commodities

The dollar rose against the yen and the euro. It lately traded at 104.8 yen, up from 104.71. The euro was worth $0.9394, down from $0.9469. For more on currencies, please take a look at

TSC's

Currencies column.

Crude oil for May delivery at the

New York Mercantile Exchange

rose to $27.40 a barrel from $26.11.

The

Bridge Commodity Research Bureau Index

rose to 213.66 from 212.75.

Gold for June delivery at the

Comex

fell to $282.5 an ounce from $283.