Bonds Meander Lower While Listening to Greenspan

Traders are reluctant to buy before today's two-year Treasury note auction and several important economic reports to be released in the next two days.
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The Treasury market is quiet this morning, listening closely to take two of


Chairman Alan Greenspan's


testimony before the

Senate Banking Committee

. The market's somewhat lower, as traders are reluctant to buy before today's two-year Treasury note auction and several important economic releases scheduled for the next two days.

The markets are also nervously hoping Greenspan backs away from Thursday's harsh words that sent the bond market into a three-day tailspin. So far, that hasn't happened. The text of Greenspan's speech is identical to his prepared remarks before


members delivered last Thursday, and committee members are pressing Greenspan for tacit approval of some kind of tax cuts.

Lately the 30-year bond was down 6/32 to trade at 89 9/32, raising the yield 2 basis points to 6.03%. By 10 a.m. EDT, tracker


reported volume down 28% when compared to the average Wednesday in the past month. Also keeping a lid on action is anticipation of this afternoon's $15 billion two-year note auction -- there's usually some selling prior to a Treasury sale, and the two-year is currently down 1/32 to lift the yield 2 basis points to 5.58%.

Bonds were lower overnight, but rose slightly when orders for

durable goods

in June fell short of the market's expectations. With important figures such as second-quarter


, the

Employment Cost Index


personal income and consumption

scheduled for later this week, this volatile release was virtually glossed over.

Seasonally adjusted orders for durable goods rose 0.3% in June, compared with a 1% consensus estimate, according to


, after a 0.8% increase in May. New orders are up 6.9% on a year-over-year basis, compared with 6.7% in May. Excluding transportation equipment, new orders fell by 0.4%, compared with May's 1.4% dip.

Chairman Greenspan began testimony at 10:30 a.m. EDT, but submitted his prepared remarks for the record and read a truncated version of the speech. The market was virtually stagnant heading into and during his testimony. The question-and-answer period has been highlighted so far by Greenspan repeatedly recommending that the projected surpluses, which may not come to fruition, be used to pay down the outstanding debt.