Treasurys Stage Modest Relief Rally; Session's Relative Calm Could Be Seen as a Pause Following Sharp Correction
Dow Jones Newswires</br></br>NEW YORK -- Most Treasurys ended higher on a modest relief rally after the conclusion of two days of congressional testimony by Federal Reserve Chairman Alan Greenspan.</br></br>But analysts viewed yesterday's relative calm as largely a pause after a sharp correction from oversold levels.</br></br>Last month, yields, which move inversely to prices, fell to historic lows after the Fed in early May cautioned about the risks of deflation. The market rallied strongly through mid-June, in part on speculation the Fed might use unconventional methods, such as buying longer-dated Treasurys, to ease monetary policy if the need arose.</br></br>But since late June, economists said, Fed officials seem to have tried to respond to what appeared to be a bubble-like appreciation in Treasurys. David Greenlaw, an economist at Morgan Stanley in New York, pointed to a statement by the Fed after a policy meeting in late June. "We've certainly seen the lows in yield" of this cycle, Mr. Greenlaw said, adding that the selloff in July has "recorrected" the Treasurys market back to where it was before deflation talk took hold.