Bonds Weaken in Thin Trade

Fears the Fed might tighten rates soon is pushing the market down.
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There's very little for the bond market to react to this morning, so Treasuries are weaker on general malaise. The economic data are relatively benign, but the weakness in financial assets is broad enough to take the bond market down along with the dollar and equities.

"This feels very consolidative," said Tony Crescenzi, chief bond market strategist at

Miller Tabak Hirsch

. "Stocks

have been off, the spread markets are weaker, the bond

yields have stopped going down. This could last a little while."

Lately the 30-year Treasury bond was down 7/32 to trade at 92 17/32. The yield rose 2 basis points to 5.78%. Tracker

GovPX

reported very thin activity, as volume was down 28% when compared with the average second-quarter Tuesday.

Crescenzi said the poor performance in the bond market -- as well as other markets -- is linked to a lingering fear that the Fed will tighten rates at one of the next

Federal Open Market Committee

meetings, either in June or August. Without economic data to allay the market's fright, the Treasury market is mildly negative.

"It's a threat that's not going to be lifted, or won't get lifted until some news comes along that says, 'all clear,'" he said.

Existing home sales

fell 3.3% in April, reflecting the rise in interest rates from last year's low levels. However, March's figure was adjusted upward to an annual rate of 5.42 million resales from an original 5.05 million, a new one-month record. In April, sales fell to 5.24 million, so those looking for weakness in the housing sector haven't gotten it yet.

The

Conference Board's

index of

consumer confidence

rose to 135.8 in May from a revised 134.9 in April. The market viewed this as mildly negative, although analysts surmised that the Fed's adoption of a tightening bias came too late to affect this particular survey.