Longer-dated Treasuries drooped on Tuesday as supply issues took center stage. But the supply glut aside, analysts said the Treasury's sale should still meet solid demand. Aside from the refunding and supply issues, the Treasury market is focused on Friday's retail sales report for April, and a planned speech on Thursday by Federal Reserve chief Alan Greenspan at a banking conference. The two events will give the market final clues ahead of next Tuesday's Fed meeting, where the central bank is widely expected to hack another half-percentage point off of the key federal funds rate. Securities with shorter maturity dates appear to be benefiting most from the widespread expectation of further Fed action, but longer-term debt has not shared in the trend as expectations grow that the U.S. economy may recover quickly from the slowdown seen in late 2000 and early 2001.
Faster growth raises the potential for inflation, which erodes a bond's value.
Mark Vitner, senior economist with First Union Capital Markets in Charlotte, N.C., said he thought yields on the benchmark 10-year security had likely bottomed out at 4.74 percent in late March, compared with 5.25 percent on Tuesday. Analysts said an outsized gain in April's retail sales on Friday could lessen chances for a half-percentage point move by the Fed on Tuesday. Economists polled by Reuters project a mild 0.2 percent increase in sales. Copyright 2000, Reuters News Service. U.S. indexes are real-time.