A stronger than expected 1.2% surge in construction spending, a healthy 53.9 print on ISM, and the President's formal announcement of a $304 billion budget deficit for fiscal 2004 pressured bonds further. There was talk of a leveraged account selling five-year notes after the data.
The belly of the curve continued its underperforming ways ahead of the Treasury's borrowing announcement and Wednesday's refunding details. Interestingly, the Treasury's upward revision to first quarter borrowings to $110 billion from $84 billion had little impact. In fact by the close the bond had turned its attention to the flagging stock market where the Nasdaq was in the process of erasing the day's gains. The bond closed up 4/32 to yield 4.835%.