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Treasuries Rise off Early Lows, but Trading Is Languid

The bond market showed little reaction to April's durable goods orders report.

Bond activity is almost -- but not quite -- as exciting as trimming one's eyebrows.

The Treasury market was set up for a fall today: The resurgence in Latin American markets and strength in U.S. equity futures had the 30-year bond down by half a point in the first hour of trading. But the stock market's idea of a rally would get most cheerleaders exiled to the physics club. All major indices were in the red for at least an hour, lifting bonds off their lows. Lately stocks have turned it around, but bonds have managed to limit their losses.

The 30-year bond was lately down just 6/32 to 92 22/32, off the low of 92 13/32 reached around 9:30 a.m. EDT. The yield rose 1 basis point to 5.76%. The two-year note is down 2/32 to yield 5.30%. (A similar change in price to shorter-dated securities produces a greater change in the yield.) The two-year is under a bit of pressure because the market is awaiting this afternoon's sale of $15 billion in two-year Treasury notes, with bids due at 1 p.m. EDT.

"The long end has been more responsive to the gyrations in the equity market all week long," said John Canavan, Treasury market analyst at

Stone & McCarthy

. "As it turned out, stocks are not nearly as strong as we expected and the quick pullback

in stocks has provided us with a bid in the long end."

But unless your name is the

Consumer Price Index

, the key inflation indicator that

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scared the market two weeks ago with its unexpected 0.7% rise, or

Alan Greenspan

, the key


guy, the bond market isn't jumping through hoops for you. The stock market's recent malaise is helping Treasuries, but only a little, because the market is most concerned about the long-term direction of monetary policy. Since the Fed's bias is toward tightening interest rates, the market is worried.

The bond market showed little reaction to April's

durable goods

orders report. Overall, orders fell 2.3%, largely the result of a 15% drop in civilian aircraft orders and a 36% plunge in defense orders. Excluding transportation equipment, orders rose 0.9%, a solid increase, following March's revised 2% gain. Overall orders rose at a revised 2.7% rate in March.

"Manufacturing is looking better, but not a whole lot better," said Mark Vitner, capital markets economist at

First Union Capital Markets

. "It's important that it's at least turned the corner."