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Treasury prices continued their slide off highs reached at various points during the last two weeks, as investors priced in somewhat higher odds that the Fed will indeed hike the fed funds rate again this year.

A minor piece of economic data contributed to that sense today, but market watchers said the action was predominantly a continuation of

Friday's trade. Rising stock prices helped dim the allure of bonds. Also, the selloff reflected caution ahead of major events later in the week, most notably the release of the May

Consumer Price Index


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chart |


) tomorrow and Fed Chairman

Alan Greenspan's Congressional testimony on the economy and monetary policy on Thursday.

The benchmark 10-year Treasury note dropped 12/32 to 102 15/32, lifting its yield 5.1 basis points to 6.152%, the highest since June 23. Shorter-maturity notes held up somewhat better, as did the 30-year bond. Later this week, the Treasury Department will try to buy back a yet-to-be-specified quantity of Treasury securities in order to retire them. Like previous buyback operations, this one will presumably target long-maturity issues, the government's most expensive debt. And like previous buybacks, it appears to be supporting the prices of long-maturity issues, relative to shorter-term ones. The 30-year bond fell 14/32 to 104 20/32, lifting its yield 3.1 basis points to 5.917%.

At the

Chicago Board of Trade

, the September

Treasury futures contract fell 20/32 to 96 29/32.

In economic news today,

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TheStreet Recommends

business inventories


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) jumped 0.8% in May, led by a 1.4% jump in retail inventories.

While not world-rocking news,

Morgan Stanley Dean Witter

economist Bill Sullivan said the inventory number was "powerful enough to force many people back to the drawing board to revise their second-quarter GDP estimates." Economists who weren't already forecasting 4%



definition |

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) growth for the second quarter will probably start doing so now, Sullivan suggested.

But the market was driven primarily by a general sense that the high price levels attained last Thursday reflected too much optimism about the interest-rate outlook.

"A lot of longs got into the market thinking that the Fed's out of the picture, that the Treasury's paying down debt, and that it would be nice to own some as they go up in price. And that we're going to get data confirming all this," said Kevin Logan, senior market economist at

Dresdner Kleinwort Benson


Friday's data -- the

retail sales


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) report in particular -- let those people down. At the same time, Logan observed, "companies are coming out with pretty good profits, the

S&P 500

is near its all-time high, so maybe

the Treasury market overdid expectations of how soft the economy was."

The fact that some Treasury yields were at their lowest levels in months when Friday's data hit sharpened the inclination to take profits, Sullivan said. "The market was fully priced going into those reports," he said.

At the CBOT today,

fed funds futures prices discounted a 54% chance of a 25-basis-point rate hike at the Fed's next meeting on Aug. 22, up from 46% on Friday.

Economic Indicators

The business inventories report showed inventories growing at a 6.1% pace in May, up from 5.5% in April. Business sales grew at a 10.8% pace, up from 6.4% in April.

Currency and Commodities

The dollar rose against the yen and the euro. It lately was worth 108.09 yen, up from 107.85. The euro was worth $0.9359, down from $0.9381. For more on currencies, see


Currencies column.

Crude oil for August delivery at the

New York Mercantile Exchange

fell to $30.83 a barrel from $31.40.


Bridge Commodity Research Bureau Index

rose to 222.10 from 220.60.

Gold for August delivery at the


rose to $284.20 an ounce from $281.90.