Despite offering its highest yields since last fall, the market failed to attract retail interest again yesterday and prices stayed trapped in a narrow range.
The long bond ended the New York session 1/16 lower, to yield 8.47 -- its highest level since last November.
"I'm bothered that no buying has come in at these levels, but for now I don't think there are any new reasons for us to move above 8.50%," said Fred Leiner, a market strategist at Continental Bank.
And there is no reason to think yields will head the other way either. "There's been nothing to change the perspective that the recovery has started," Mr. Leiner said.
In fact, that point of view was given new support Friday, when non-farm payrolls jumped 59,000, instead of falling 78,000 as the market had expected.
Mr. Leiner said the main question now is how strong the recovery is likely to be. "Most people are still of the belief that the recovery will be modest at best, and inflationary pressures will remain subdued," he said.
Later this week, the market will see the producer price index for May, a key indicator of where inflation might be headed as the predicted recovery gets underway. Also on tap for Thursday are last month's retail sales figures and initial unemployment claims and auto sales for last week.
One trader said retail investors "still own a fair number of securities, and they're not going to add on unless they get some pretty good news" from Thursday's numbers.
Mr. Leiner said that if the price index shows only a moderate rise, at or below the 0.3% economists are predicting, then it should have no price impact on treasuries. If that happens, "then I think people will conclude that inflationary pressures will remain modest, and 8.50% might be a high enough yield on the bond" to attract new buying interest, he said.
On the other hand, if inflation shows signs of larger increases, that could bring the long bond through the 8.50% threshold and beyond, Mr. Leiner said.
Gold prices were already reflecting concern over the pace of inflation and the recovery. Gold was trading yesterday as much as $7 higher than Friday's close.
With little market activity yesterday, New York City's ticker tape parade for returning Desert Storm veterans provided some distraction for otherwise idle traders.
"A lot of folks are going to spend today shredding their charts for the last three months and throwing them out the window," one trader said around lunchtime.
The September bond future contract close unchanged, at 92 28/32.
In the cash market, the 30-year 8 1/8% bond was 1/16 lower, at 96 3/32-96 7/32, to yield 8.47%.
The 8% 10-year note also fell 1/16, to 98-98 4/32, to yield 8.27%.
The three-year 7% note was up 1/32, at 98 29/32-98 31/32, to yield 7.39%.
Rates on Treasury bills were mixed, with the three-month bill unchanged at 5.57%, the six-month bill up two basis points at 5.76%, and the year bill unchanged at 6.00%.