Long Bond Whacked in Light Trading

Poor technicals and buyback fallout bedeviled the 30-year issue. Shorter-maturity yields rose less.
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The Treasury market ended mixed, with short-maturity instruments little changed, the benchmark 10-year note down modestly and the 30-year bond down significantly.

Market analysts blamed a combination of a negative technical backdrop and continued fallout from

Thursday's buyback operation for the fate of the long bond, which fell 23/32 to 105 6/32, lifting its yield 5.1 basis points to 5.880%.

Meanwhile, pain in the

Nasdaq Stock Market

supported short-maturity Treasuries, a proxy for cash, market watchers said.

There were no economic releases or other events affecting bond trading. Volume was exceedingly light, reaching just $21.7 billion by 3 p.m., according to tracker

GovPX

-- 28.4% below the average for a Monday over the last month.

The technical situation affecting the bond, according to

A.G. Edwards

strategist Bill Hornbarger, was that the June

bond futures contract listed on the

Chicago Board of Trade

closed below a key upward-sloping trend line twice last week. "That changes people's perception of what's happening," he said.

Hornbarger added that the latest

Commitments of Traders

report by the

Commodity Futures Trading Commission

, released on Friday, also had bearish implications for the Treasury market. It showed that investors in Treasury futures who also invest in the underlying securities are increasingly short the futures, indicating that "they're seeing less value in the bond."

Meanwhile, there was probably some selling by people who expected to unload long Treasuries in last Thursday's buyback but who did not offer the bonds at a price low enough to be accepted, Hornbarger said.

The 10-year note fell 6/32 to 103 15/32, lifting its yield 2.5 basis points to 6.025%. The five-year note fell 2/32 to 98 15/32, lifting its yield 2.1 basis points to 6.266%. The two-year note was unchanged at 100 6/32, its yield 6.388%.

Falling Nasdaq stock prices didn't provide more support to the Treasury market,

Barclays Capital

senior economist Henry Willmore said, because the other major stock proxies fared better. The action reflected "a realistic view that what's going on with the Nasdaq is not as important as the broader market" when it comes to influencing the economy, and "the broader market is down only a modest amount this year," he said. "In the absence of a significant move down, recent

economic data" -- the

Consumer Price Index in particular -- "would argue for higher bond yields."

Traders may also be unwilling to buy Treasuries aggressively ahead of key economic reports due out later this week. Thursday brings the

Employment Cost Index and

GDP, both for the first quarter. The ECI in particular has the potential to alter the prevailing view of how much the

Fed will hike the

fed funds rate in the months ahead to slow the economy. Traders of

fed funds futures currently expect the rate to rise to 6.5% by September from 6% today.

Currency and Commodities

The dollar fell slightly against the yen and rose against the euro. It lately was worth 105.76 yen, down from 105.77. The euro was worth $0.9376, down from $0.9381. For more on currencies, please take a look at

TSC's

new

Currencies column.

Crude oil for May delivery at the

New York Mercantile Exchange

rose to $26.04 a barrel from $25.88.

The

Bridge Commodity Research Bureau Index

fell to 211.81 from 212.78.

Gold for June delivery at the

Comex

fell to $281.20 an ounce from $281.50.