Treasuries improved for the first time in five sessions, but volume was very light and interest was minimal, because everything going on this week starts tomorrow.
to deliver his
testimony to the
. The Fed today confirmed that, per usual, his prepared text will be
the same one he delivered to the
last week. But there's still the chance that in the Q&A portion of the testimony Greenspan will say something to help traders handicap the possibility that the Fed will raise interest rates again at its next meeting on Aug. 24.
Tomorrow also brings an important economic report --
durable goods orders
for June -- but the more important economic news comes on Thursday in the shape of the second-quarter
Employment Cost Index
. The ECI, which measures wage pressures, is more important than durable goods,
senior economist Richard Yamarone said, because "the economy has proven that it can run solid and strong in the absence of inflation." Order durable goods till the cows come home; until your tireless ordering starts putting upward pressure on wages, it's not necessarily something to worry about.
Today's only major indicator, the
Consumer Confidence Index
for June, was bond friendly, easing to 135.6 from 139 in May, which was a 31-year high. A less-confident consumer presumably doesn't order quite so many durable goods.
The benchmark 30-year Treasury bond finished the day 8/32 higher at 89 17/32, trimming its yield 2 basis points to 6.03%. Shorter-maturity note yields fell by anywhere from 1 to 4 basis points.
Scott Graham, co-head of government bond trading at
, attributed the strength in Treasuries, such as it was, to hedging activity related to a corporate new issue (upon placing a corporate new issue with investors, underwriters may buy back Treasuries they had sold as a hedge against a market selloff) and to Germany's planned sale of 10-year notes tomorrow. Accounts that plan on buying Germany's new notes tomorrow sold them today and bought 10-year Treasuries, Graham said, a trade that "might be partly unwound tomorrow."
A sufficiently strong durable goods report could also put pressure on Treasuries tomorrow. The average forecast among economists surveyed by
is for a 1.0% gain, and Yamarone said it will get a boost from orders for air conditioners during the July 4 weekend heat wave.
But attention will probably shift quickly to Greenspan and the ECI. Unless Greenspan says something to shift the mood, Graham said an ECI gain over 0.9% (the
consensus forecast is for a gain of 0.8%) "is going to be construed as very negative." It would lift the odds of an August rate hike, he said, from 60% currently to 75%.