A productivity update, five-year note auction, Greenspan's early retirement talk and Fed comments vied for attention in a drowsy Tuesday session. The curve flattened initially on the welcome news that Q2 Nonfarm productivity rose 2.5% and annual back revisions were not unexpectedly onerous on the downside, with the bond outperforming. But, following a bout buying by a commodity broker, the September bond stalled after breaking through Friday's 103-08 top and then conceded its gains into the auction.
Five-year bonds went down reasonably well, mostly given the smaller size of the reopened issue, but the middle of the curve bowed into the close and 10-year notes underperformed ahead of tomorrow's new $11 billion in new paper. The September bond settled 2/32 lower at 102-29, while the cash bond finished unchanged.
Fed's Moskow and Stern made cautiously optimistic remarks on economic recovery prospects, but did not sound overconfident ahead of Wednesday's regional Beige Book report. In regard to payrolls and productivity, both warned not to read too much into one month's data. Stock indices mostly waffled in single digits.