Treasuries overcame a number of obstacles Tuesday, including a snap-back equity rally, refunding jitters and Arafat rumors. Data was mostly the friendly variety, as consumer confidence and Chicago area PMI both declined modestly -- near expectations.
Rumors swirled early on that PLO Chairman had been killed, but Treasuries weren't really sure which way to turn, so the curve initially steepened, then flattened back out as the rumor was denied. This provided the excuse to passively fade the concession building process on five-year and 10-year notes ahead of Wednesday's refunding announcement and, indeed, the belly of the curve outperformed by the end of the day.
Pit and screen volumes were predictably light and, along with month-end booksquaring, contributed to the rangy tone and allowed Treasuries to overcome their supply-shyness. The June bond closed up 11/32 at 102-10/32 and the two-year note and 30-year bond spread closed a basis point wider at +237 basis points.
NYMEX Jun crude jangled in a $27.10-60 per barrel range amid the MidEast nerves, but mostly awaited API stock data after the close. The dollar on balance mimicked the stock gain after slipping ahead of Wednesday's May Day break in Europe.