Stocks' Rise Takes a Back Seat to Supply Worries

Another jumbo bond deal is pressuring Treasury bonds.
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IBM's

(IBM) - Get Report

stellar earnings report is the most visible event today, but the bond market is more concerned with supply. The announcement of another jumbo bond deal is putting greater pressure on Treasury bonds than is the

Dow's

rise.

Lately the 30-year Treasury bond was down 13/32 to 95 20/32. The yield rose to 5.55%.

Originally, analysts estimated the pace of new bond issuance would downshift this week, after last week's $4 billion

Conoco

(COC)

offering and $1 billion

Korea Development Bank

issue. Only one billion-dollar corporate bond offering has been priced this week, but as of this morning, total corporate issuance for the week is close to $4 billion.

"Last Tuesday total corporate and agency totaled $8.8 billion," said Ken Fan, bond strategist at

Paribas Capital Markets

. "People were expecting a tapering off, but it seems like it's picking up again."

Fannie Mae

(FNM)

announced a $1 billion deal this morning, expected to be priced Friday or Monday. Fannie's deal has a 10-year maturity, so the 10-year bond is also under the market's thumb, lately down 3/32 to yield 5.20%.

Freddie Mac

(FRE)

is rumored to be planning another billion-dollar 10-year deal as well, but a Freddie spokesman wouldn't confirm that rumor.

Even though supply is the overarching concern, on a minute-by-minute basis bonds are moving in step with the stock market. The June bond contract, which pared its losses as the Dow pulled back, is moving lower again. The futures contract recently was down 17/32 to a session low of 121 17/32.

Federal Reserve

Chairman

Alan Greenspan

is testifying this morning on dollarization of emerging-market economies before the

Senate Banking Committee

subcommittee on economic policy and international trade, along with Deputy Treasury Secretary

Lawrence Summers

. All speeches by Greenspan carry a modicum of uncertainty, but his remarks today are unrelated to the U.S. economy and monetary policy. At one point, Greenspan reiterated that the Fed would not adjust monetary policy to benefit other economies.

Initial jobless claims

fell 5,000 this week to 314,000. The four-week moving average rose to 306,250.