Treasuries trended lower on Monday, but the selloff picked up steam later in the session as traders reversed course. On the open, short-covering underscored the opening bid, but this was short-lived as speculators sold the pop.
The better-than-expected strength in the housing data, however, along with the $26 billion 2-year notes auction announcement, temporarily stemmed further steepening. Retail participation was muted, but biased towards selling, as was activity from swappers. In Eurodollars, early technical buying gave way to a wave of hedge fund and swap selling.
Prices stabilized off the lows by noon, but traders reset shorts. Amid a pick up in volume, prices fell lower with more technical traders joining in the sales. The dollar rally also pressured Treasuries, after Eurozone officials said it will warn at the G7 meeting in February about the economic dangers of a strong single currency.
Tuesday's report on January consumer confidence has a strong risk for an upward surprise.