Ten-year and 30-year Treasuries traded solidly lower due to mortgage backed sellers. The note initially slipped as stocks rallied, but the then Treasuries rebounded off their lows on weaker than expected consumer confidence figures and a rumor -- later denied -- that U.S. troops were in Iraq. However, with significant event risk with Federal Reserve Chairman Greenspan's testimony before the House Banking Committee tomorrow, late afternoon position squaring weighed heavily on the note.
The market's perception is that the economy is improving, and traders won't need to hedge as much against lower rates. Most observers see higher rates ahead.
Meanwhile, the Fedchief's testimony tomorrow is expected to be stock market friendly. Several analysts don't think the Fed will tighten anytime soon even if the economy is strong in first half of year. Many are worried about a second half slowdown.