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Fedspeak dominated Monday, with the data dearth contributing to a low-volume rally across the curve. Fed Chairman Greenspan set the tone very early, in Asia in fact, with a video speech that resonated with diminished inflation pressures and residual concern about the toll elevated energy costs were taking on the national spending psyche. That pumped up the long end until the Challenger layoff survey reported a surprising 52% drop in job cuts.
The curve remained relatively inert, as the front end caught up and the September bond stalled out ahead of the 101 handle. A slight edge went to the belly of the curve, outperforming bills, ones and the bond amid off-setting murmurs of a big buyer (7,000) of 5s and a rate lock seller to the tune of 10,000 for the upcoming $1 billion EBRB deal.
Dallas Fed's McTeer largely repeated his optimistic gloom from last week, while Governor Kelley announced he would resign, pending replacement. With Europe on part holiday for Whit Monday, the dollar continued lend support to the fixed income equation, probing $0.8430 Friday and November-2000 euro lows and the ECB's patience.