Treasuries staged a mini rally in the late session and closed near yesterday's prices. In doing so, they also halted their negative trend of the past three days. The market seems to be firming up as the third and final leg of the quarterly Treasury auction concluded today with $10 billion in 30-year bonds sold.

Traders had been selling in the morning to drive down the price of the bonds that were due to go on the auction block in a few hours. Although primary dealers cannot take part in the bidding process itself, they reap the benefits of lower prices in subsequent bartering.

The money market also comes under supply-side pressure during such a period of Treasury re-funding, as excess availability of issues lowers their selling value.

For strategists, though, the day was uneventful in the sense that there was little to justify major shifts in portfolio positions. As Michael Brilley, bond portfolio manager at

Sit Investments

, put it, the market went down and up but really got nowhere.

The benchmark 10-year

Treasury note fell 1/32 to 99 9/32, lowering its yield 12 basis points to 5.089%.

The 30-year

Treasury bond rose 3/32 to 110 12/32, lowering its yield 0.7 basis points to 5.529%.

Gary Pzegeo, vice president and portfolio manager at

Evergreen Investment Management

, regards the forthcoming

retail sales

(

definition |

chart |

source

) report as an important yardstick of where things stand on the macroeconomic front.

"The next picture on the horizon is the retail sales, which comes out on Tuesday. The weekly retail number has been picking up and suggests that the consumer is not throwing in the towel. If this trend continues, it will soften the landing for the economy, barring any further collapse in stocks," he said.

A "soft landing" would prevent any precipitous meltdowns in the financial markets by absorbing much of the bad news well beforehand and minimize spillover effects in other sectors.

The results of the long bond auction indicate that investors are not putting much of a scarcity value on the security. Their interest in the sale itself was modest, similar to the reaction toward the five- and 10-year auctions over the past two days. However, the bond market traditionally becomes more volatile after Treasury offerings as traders put their plans in action.

Speculating on whether this year would be the last one to see new 30-year issues, Pzegeo said the long bond's fate could go in either direction. He added, however, that regular federal surpluses would lessen the motivation for keeping this long-term money instrument.

President Bush submitted his $1.6 trillion tax cut to Congress today. Democrats oppose the extent of the tax, claiming that it is designed to help the wealthy. How the tax changes will influence markets remains uncertain. "It is difficult to price in the effect of a tax cut because of the delayed impact," said Pzegeo.

At the

Chicago Board of Trade

, the March

Treasury futures contract was unchanged at 104 11/32.

Economic Indicators

In economic news, the

initial jobless claims

(

definition |

chart |

source

), which tracks the number of laid-off workers applying for unemployment benefits for the first time, rose for the third consecutive week. The bond market has already priced in this trend, however. There were 361,000 claims for the period ended Feb.3, up from 346,000 the previous week. Economists polled by

Reuters

had forecast 348,000. The four-week moving average, considered the more reliable indicator of unemployment, rose to 331,250 from 327,000.

The

Consumer Comfort Index

(

definition |

chart ), which measures consumer expectations of the economy along with their private finances, slid 2 points to 16. It is back to its lowest level of the year.

Currency and Commodities

The dollar rose against the yen and the euro. It lately was worth 116.60 yen, up from 116.35. The euro was worth $0.9176, down from $0.9278. For more on currencies, see

TSC's

Currencies column.

Crude oil for March delivery at the

New York Mercantile Exchange

rose to $31.55 a barrel from $31.27.

The

Bridge Commodity Research Bureau Index

fell to 224.81 from 226.18.

Gold for March delivery at the

Comex

fell to $260.10 an ounce from $262.80.