Technicals and a Bit of Emerging Markets Trouble Lift Bonds

The 30-year bond is trading at 5.96%, a level it hasn't closed below since June 7.
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Treasuries are firmly higher this morning in what bond market watchers were calling technically driven trading. Volume is light ahead of key economic data slated for release on Wednesday and Thursday, making the market easy to move.

With no economic reports on today's calendar, the benchmark 30-year Treasury was lately up 19/32 at 90 7/32, trimming its yield 4 basis points to 5.96%, a level it hasn't closed below since June 7. Shorter-maturity note yields were lower by anywhere from 3 to 6 basis points.

"It's more technical than anything at this juncture,"

Lehman Brothers

economist Joel Kent said.

Treasuries traded off earlier in the session in sympathy with continued weakness in German government bonds, Kent said. Bund yields are rising in large part because the euro continues to lose value, lessening the appeal of euro-denominated assets.

There's no clear fundamental reason for the bounce at this point. It may be that investor remarks by

Chicago Fed

President

Michael Moskow

this morning "are being interpreted as meaning the Fed won't be tightening any time soon," even though the remarks were balanced, Kent said. According to

Market News

, Moskow said the Fed should neither slow the economy too much nor let it run too fast. (Fair enough.)

Stock market selloffs in Argentina (lately down 6.98%) and Brazil (lately down 1.84%) may also be playing a role.

But at the end of the day, it's a 5/8 point move in a market that's counting down the minutes to the release of

retail sales

data for June on Wednesday at 8:30 a.m. EDT. The June

Producer Price Index

comes out at the same time, and the

Consumer Price Index

follows 24 hours later. It's tough to state with much conviction where you think interest rates are headed till you see those reports.

"What you're looking at is a range trade,"

Warburg Dillon Read

Treasury market strategist Mark Mahoney said.

Retail sales is most important, Mahoney said. "Consumption is the biggest problem we have right now. It's growing at a steady pace, and if it keeps growing the Fed's going to have to tighten." The inflation numbers, by contrast, have been well behaved (apart from the above-trend performance by the CPI in May.)