Bonds Slip a Tad After Modest Further Gains

The fixed-income market has traded fitfully this morning, coming off the big Friday rally.
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The Treasury market, happily back in a range after Friday's mixed March

employment report

, has slipped slightly after moving mildly higher this morning on light trading. The intermediate sectors are lower, attributable to dealer hedging in expectation of corporate issuance.

Recently the 30-year Treasury bond was down 3/32 to trade at 94 28/32. The yield on the bond edged up to 5.61%.

GovPX

reported 50% of the usual volume as of 10 a.m. EDT. Most European markets are closed, which is holding down volume.

This morning's earlier gains were tentative. Those traders who had to work Friday were able to push prices higher on the weak nonfarm payroll data, but seasonal and weather-related factors were largely responsible for the 46,000 figure. So nobody is proclaiming the job market dead just yet.

"I don't think people are using that report as an impetus to break out of the range, but to put us back in it," said Tony Crescenzi, chief bond market strategist at

Miller Tabak Hirsch

.

A yield of 5.70% right now clearly appears to be the high end of the established range, now that the market has bounced off that level twice since the beginning of March. Two factors are expected to push bond yields lower, but both are subtle, gradual forces that won't push bond yields out of their current range without a more dynamic catalyst.

One, of course, is the expected paydown resulting from tax receipts. The government is expected to pay down $125 billion to $135 billion in debt of various maturities, mostly concentrated in the short and intermediate sectors.

Secondly, Japanese investors, who tend to pull back on foreign spending leading to the March 31 end of the Japanese fiscal year, are going to come back into the market this month. Typically, the total outflow of Japanese assets into foreign bonds is more than twice the average rate, according to a March 30 comment by

Morgan Stanley Dean Witter's

John Montgomery, who added that the overall affect on bond markets is "likely to be small."

Japan's

tankan

survey of business sentiment, released quarterly, showed that the business condition diffusion index for large manufacturers modestly improved to minus 47, from minus 49 in the December survey. Better, but still not great.

Today's only release was the

National Association of Purchasing Managers nonmanufacturing

survey, a nascent indicator that measures sentiment in the service economy. In March the sector rose to 62.5 from 57 in February. Like its manufacturing counterpart, it indicates expansion in the sector when it reads above 50, contraction when it falls below 50.