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Treasuries are weaker today, reacting to the strength in the equity market. However, the session was a bit quiet, as the market looks ahead to tomorrow's 8:30 a.m. release of the

employment report. Some believe that, should the report come out weaker than expected, the market will rally on increased expectation that the

Federal Reserve

will cut rates prior to their May 15 meeting.

Lately, the benchmark 10-year Treasury note was down 11/32 to 100 6/32, moving the yield up to 4.973%. The 30-year bond was down 21/32 to 97 26/32 to 5.525%.

According to Tony Crescenzi, chief bond market strategist at

Miller Tabak

, today's decline in the bond market was due in part to the stock market's strong day. However, Crescenzi noted that the decline was "somewhat muted," and that the real driver would be tomorrow's employment numbers. The employment report is the most important monthly assessment of labor market strength or weakness.

Tomorrow's data begin the round of March releases that will shape the market's view towards the potential for more rate cuts. It's expected that the unemployment rate rose to 4.3% from 4.2% and that nonfarm payrolls grew 58,000 in March, after a 135,000 gain in February.

"We're really looking ahead to tomorrow. If the number is much weaker than expected, it's likely the bond market will look for an intermeeting rate cut. Bond investors will begin to price in an early rate cut," Crescenzi said.

On the other hand, a strong report likely would worsen the market's current decline, and short maturities would fare worse on the view that the Fed might not cut rates in-between meetings or that future rate cuts would be smaller than expected. Short rates, principally the two-year note, react most dramatically to expectations for changes in monetary policy.

In recent days there's been more active selling going on in the long end in reaction to both Fed officials and strengthening in the stock market. The long bond had been strong for the second half of 2000 and early this year. Long-dated securities react most strongly to expectations for economic growth, and the selling in the long bond reflects a view that economic growth will eventually recover. This is also called "steepening," that is, when the difference yield between two-year notes and the 30-year bond increases.

"It's gotten to the point where it thinks there will be more Fed easing, but that the market will be eventually successful in turning things around," said Josh Feinman, chief economist at

Deutsche Asset Management Americas

. "It's taking the long-term view that the economy is going to be looking healthier."

Fed officials contributed to that view also. Today, Boston Fed President Cathy Minehan, who reiterated themes expressed by other Fed officials that inflation is not a "pressing concern" and that the economy continues to grow. Fed officials have resisted sounding alarmist about the economy, likely because they don't want to be viewed as panicking. But Fed Governor

Larry Meyer

, also speaking today, told an audience that the slowdown was "sharper than expected," acknowledging, somewhat obviously, that Fed officials' forecasts aren't always on the mark.

The market is placing diminishing possibility on the Fed cutting rates from the current 5% level prior to the May 15 meeting. Fed officials have mostly sounded a similar tone in recent weeks, seeming to suggest that they're resistant to the idea of a rate cut prior to their May 15 meeting, and don't want to give the market false hope.