The Treasury market began February much as it left January, with the long bond closing marginally higher on the session, while the rest of the curve lagged behind. Supply factors, gains in equities, and stronger than expected data generally kept Treasuries under water, although the bond managed a late-afternoon rally to close in the green. Profit taking overnight, in conjunction with rising equities, weighed on Treasuries early.
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%.