Treasuries closed higher ahead of the

Federal Reserve's meeting next Tuesday, even though volume was relatively light. The longer-dated securities, which have been trailing behind the shorter maturities, managed to regain some ground today.

The two-year note, which reacts most dramatically to expectations of monetary easing, finished higher by 2/32 to 99 27/32, with a yield of 4.070%. Yields and prices move in opposite directions. The 10-year benchmark note gained 20/32 to 98 23/32, yielding 5.166%, while the 30-year Treasury climbed 1 1/32 to 95 28/32, yielding 5.662%.

Traders gave a few reasons for today's strength in bonds, including the market's conviction that

Alan Greenspan & Co.

will continue to ease interest rates at the upcoming May 15 meeting. According to the

fed funds futures contract for May, the market is fully pricing in a 50 basis point rate cut next week.

"The curve steepened dramatically after last Friday's unemployment numbers," said Alan De Rose, executive director of proprietary trading at

CIBC Oppenheimer

. Shorter-term securities rallied after a weaker-than-expected employment report indicated that payrolls

fell by 223,000 in April. "But for the first time, really, the back end has traded better than the front end," he added.

The short-maturity Treasuries, including the two-year note, tend to rally in reaction to weak economic data that could give the Fed more incentive to keep lowering interest rates. The longer maturities, on the other hand, focus on the possibility of inflation, and the prices of these securities fall on inflationary worries.

According to the latest

survey by the

National Association for Business Economists

, most economists still see little chance of a recession in the U.S. The latest survey was taken prior to the April employment report. "While the business outlook remains cloudy, and profits are under severe pressure, NABE panelists have remained steadfast in their belief that a recession is unlikely," wrote NABE President Richard Berner, who is also chief U.S. economist at

Morgan Stanley

.

NABE panelists left their

gross domestic product growth forecast of 2% for 2001 intact, but lowered their growth estimates for 2002 to 3.1% from 3.5%, according to the report.