Treasuries climbed today amid the weakness in equities and more signs of economic slowing in Japan, which experts believe could hurt the chances for a quick recovery by the U.S. and lead the

Federal Reserve to continue its policy of lowering interest rates.

In recent activity, the two-year Treasury note gained 5/32 to 100 9/32, with a yield, which moves inversely to the price, of 4.095%. The 10-year benchmark note gained 18/32 to 97 26/32, with a yield of 5.289%, while the 30-year Treasury bond climbed 23/32 to 95 18/32, lowering the yield to 5.686%.

Traders said today's selloff in equities was one of the main reasons for the strength in both longer- and shorter-dated government securities. Investors tend to rotate money into the Treasury market from the stock market, which was feeling spooked by a fresh batch of earnings warnings from tech companies.

According to Dana Johnson, head of capital markets research at

Banc One Capital Markets

, Treasuries were also boosted by this morning's economic news that Japan's first-quarter

gross domestic product numbers reflected a contraction of 0.2% for the first three months of 2001, well below expectations the economy would grow 0.2%. As a result of the poorer-than-expected data, the yen slipped and the dollar rose on concerns Japan is heading for its second recession in two years and its fourth in the past decade. The dollar closed at 120.97 yen on Friday.

In general, the shorter-dated securities tend to react most dramatically to changes in expectation of the Fed's monetary policy, while the longer-dated securities reflect investors' expectations of the economy and the prospect of inflation.

Dallas Fed President Robert McTeer said in a speech this morning the U.S. economy is "at or near the bottom and probably won't tip into recession," according to

Reuters

. He also said inflation pressures are "fairly benign."

Bond watchers expect more data on the U.S. economy, which will be released later this week, to have an impact on the market. The

retail sales report for May, as well as the

consumer price index and

producer price index figures, will be posted.

"The most important data will be the retail sales report," said Johnson. "That's always a hard number to forecast, particularly hard right now given a number of revisions in the data. But generally the real issue is how well consumer spending will hold up." On Friday, the market will also get the

University of Michigan's

initial June

consumer sentiment index.

Johnson also noted the

industrial production and capital utilization figures on Friday will be key, as the market is "much more focused on how weak the economy is."