With Bears in Control, Bonds Roll Downhill

The 30-year Treasury's yield is at its highest level in almost a month.
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Bonds picked up where they left off last week with more selling, selling, selling. The 30-year Treasury's yield was lately at its highest level in almost a month. There isn't a specific catalyst for today's selloff -- bonds were down even before stocks opened, so it's not the equity market's fault -- just more bearish concerns about global recovery and weekly supply.

Lately the 30-year bond was off 16/32 to trade at 94 16/32. The yield on the bond stands at 5.635%, its highest level since April 1. Volume as of 10 a.m. EDT was up 8% when compared with the average second-quarter Monday.

"The high volume days are on the downside," said Tony Crescenzi, chief bond market strategist at

Miller Tabak Hirsch

. "If the prospects are good, people who've been itching to buy buy on the downside. We haven't seen that this year. Until there's a strong upside day, it's fair to say there's really narrow support for the market."

Stock indices in Thailand, South Korea and Hong Kong all reached yearly highs during the weekend. Recovery in Asian equities indicates investors are more comfortable with allocating capital to those markets. The shift in sentiment doesn't necessarily mean economic recovery is forthcoming, but it's been partly responsible for the rising negativity among traders in the bond market. Analysts believe the market will take solace from Friday's first-quarter

gross domestic product

report, specifically the price deflator, but it's expected to be short-lived.

As usual, supply in other fixed-income sectors is generating more interest than the Treasury market.

Sprint Capital

, a unit of

Sprint

(FON)

, is expected to sell $3 billion in securities later this week.

Fannie Mae's

(FNM)

$2.5 billion offering was priced today.

Bond indices, such as the

Lehman Aggregate

, have been rebalanced to reflect diminished Treasury supply and the growth in corporate and especially agency debt. Investment-grade corporate supply for this year totals $268 billion through Friday, 2% behind last year's pace, according to

Securities Data

, but federal agencies such as Fannie Mae are selling billion-dollar issues on an almost-weekly basis now to match investors' demand for safe, liquid bonds.