Stock market gains, especially in the technology sector, also hurt treasuries, diminishing their allure as a safe haven and holding out the possibility that higher stock prices could aid the economys recovery this year. Analysts said selling throughout the session came amid wariness that Federal Reserve chairman Alan Greenspan might sound more positive about prospects for economic recovery when he appears before the Senate Budget Committee on Thursday than he did when he spoke about the economy on Jan 11.
People want to pick the end of the Fed ease cycle (and) expect Greenspan to signal things are on hold, said Peter McTeague, treasury strategist at Greenwich Capital Markets. Confusion about the message of the Jan 11 Greenspan speech when he said the US economy showed signs of stabilizing but still faced significant risks has emerged in recent days.
Two newspaper articles over the three-day holiday weekend questioned the severity of Greenspans assessment, causing players to read just their bets to reflect a smaller chance of a Fed rate cut at next weeks monetary policy meeting.
Youve got to be afraid that he might say something that will be positive for the economy and hurt the front end of the market, said Andrew Brenner, head of institutional fixed income at Investec Ernst & Co in New York. A statement by White House budget chief Mitchell Daniels that the administration will propose a suspension in debt reduction through fiscal year 2004 also rankled bond investors. Reuters