The World Health Organization claimed that the SARS epidemic had peaked in Asia, which removed some of the safety premium on bonds, as this could be good news for the bruised Asian economy. This news accounted for a good portion of the early selling on Treasuries after equities staged a recovery. Subsequently, North Korea came out with proposals to suspend their nuclear arms and missile systems, which drew a cool response from Secretary of State Powell.
Treasuries then recovered roughly to unchanged levels in the face of another late stock push 2% higher. The June bond closed unchanged at 113-14, while the two-year note and 30-year bond spread narrowed two basis points to +322 basis points, giving back some of Friday's corrective curve steepening on the weak GDP data.
The dollar partly recovered from a weak stretch, in line with stocks. The Treasury's borrowing projection of $79 billion for the second quarter did not really upset the market, coming right at the close and within expectations.