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Treasury prices ended lower, with the exception of the long bond, as the money market took its cues from Federal Reserve chairman Alan Greenspan's semiannual testimony in front of Congress. The securities had started the day stronger but began slipping once it became clear that Greenspan was not talking of any imminent Fed action. Yields showed more volatility and movement at the market's shorter end, with that of the two-year climbing by about 10 basis points.

The benchmark 10-year

Treasury note fell 3/32 to 99 15/32, raising its yield 1.2 basis points to 5.066%.

The 30-year

Treasury bond rose 1/32 to 99 13/32, lowering its yield .3 basis points to 5.415%.

Addressing the

Senate Banking Committee

, Greenspan sounded cautious about economic recovery, even saying that its main components are susceptible to more "downside risk." But he also acknowledged the slight pickup that has been evident in recent weeks, and in subsequent responses to Senators' questions, made it clear that there is no recession at present.

The markets have already accounted for the painful economic realities the central bank chief referred to. They don't expect the turnaround to kick in before the second half of the year. Nevertheless, traders had been accumulating shorter-term Treasury notes in the hope of yet another intermeeting interest-rate cut, which now seems very unlikely.

"There were no surprises. Greenspan didn't say anything that caught people off guard," said Mike Ryan, chief fixed-income strategist at


, adding that the general impression is that things are a little more upbeat.

Greenspan acknowledged that the

Federal Open Market Committeehad been aggressive in its monetary policy to counter the inventory imbalances that have occurred due to poor consumer demand and corporate down cycles. He stressed his team's need to respond in tandem with the more-rapid adjustments made by the private sector because of the faster availability of business data.

Ryan thinks that Greenspan was publicly pondering the fact that the Fed now enjoys similar access to relevant information that other decision makers in the business world have. "It means that as the investment-consumption mix changes, the Fed will be more timely in its response, but not necessarily pro-active," he said.

Imminent rate cuts may not be forthcoming, but Greenspan's note of the need to act in opportune fashion may serve to reassure investors that the central bank will be watching the economic decline closely and intervene as promptly as they feel is required.

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Ryan believes that, in the near term, the Fed is returning to more "standard operating procedure," with no more intervening cuts. "I expect it to lower rates again at the March 20 FOMC meeting, and that should be 50 basis points," he said.

Greenspan spent a considerable amount of time today responding to senators' questions on the proposed tax cuts, calling the $1.6 trillion "average" in size. He also stated that chances of a recession would not be reduced by the new tax policy.

"Basically, Greenspan said that the fiscal policy is too blunt to have a profound impact on the business cycle. Despite the large projected surpluses in the federal surpluses, there is a structural limit on how much of the debt can be repaid," Ryan explained. "Greenspan was inferring that it is impractical to pay off the debt in such a way and therefore it would be far better to have tax breaks rather than divert the excess money toward public cost."

Treasury Secretary Paul O'Neill asked Congress today to move quickly on the tax plan, saying that it will help lift consumer confidence. Consumer spending constitutes about two-thirds of the total economy and is therefore considered one of the most important factors in its performance, something that Greenspan has emphasized in recent speeches.

At the

Chicago Board of Trade

, the March

Treasury futures contract fell 6/32 to 104 7/32.

Economic Indicators

In economic news,

retail sales


definition |

chart |


) for January came out slightly higher than expected. They rose 0.7% for the month, up sharply from the 0.1% increase recorded in December. Economists polled by


had predicted 0.6% growth. Excluding auto sales, the number was up 0.8%, compared with expectations of 0.4%. The year-to-year moving average is up by a healthy 5.0%. Although this figure is much lower than last year's readings, it is greatly improved from December's average of 1.4%.The

BTM-UBSW Weekly Chain Store Sales Index


definition |

chart ) rose 0.8% for the week ended Feb.10, after falling 0.1% in the prior week. The 12-month moving average slipped to 3.4% from 3.7%.

Heavy sales and promotional activity contributed to the improvement in retail sales in the opening weeks of the year. With shelves now cleared of discounted items, February numbers will be a truer reflection of consumer behavior.


Redbook Retail Average


definition |

chart ) indicated that sales in the first week of February were up by 2.0% from year-ago levels, but were down by 0.9% from January. The forecast was for a decline of 0.1% from last month.

Currency and Commodities

The dollar fell against the yen and rose against the euro. It lately was worth 116.67 yen, down from 117.49. The euro was worth $0.9200, down from $0.9310. For more on currencies, see


Currencies column.

Crude oil for March delivery at the

New York Mercantile Exchange

fell to $30.30 a barrel from $30.51.


Bridge Commodity Research Bureau Index

rose to 224.34 from 223.26.

Gold for March delivery at the


slipped to $260.30 an ounce from $260.70.