2:50 pm - Covering: The dollar has been working quietly back in position squaring in holiday lightened trade with the holiday altered week likely to see sketchy action across the board. The index has been pushing back toward 75.20, having fallen in to a fairly tight range on the back of the size drop. The euro has been backtracking on the buck and the yen as trade gets cleaned up ahead of a 2 day onslaught of data and record level treasury auctions. The currency has dipped through to 1.4960 and 133.30. The yen has been stalled around 89.10 on lightened flows with Japan out on holiday and the unwinding risk trade but still holding it near the best since mid-October Gold has backed off its latest record level with spot running 1164.30 (+13.70), while crude is also slipping after matching last week's highs running 77.67 (+0.20). The day ahead also has a rash of eurozone reports but the FOMC minutes will set the tone for the remainder of the week.

2:05 pm - Sneaking Back: The market has little going on with the post-auction trade dragging along at lower levels, but trying to get some back in low level short coverage. The day's auction, while not exactly pretty, was at heart OK, so there may be some relief ahead of tomorrow's 5-yr. As RBS's William O'Donnell put it to Reuters "Indeed, the very light flows in two-years seen today only brought the auction stats back to normal from stellar." So the lofty outings seen in recent months may see some normalization this week. This is not quite the end of the line for auctions this year, but close, and has been pointed out repeatedly; many players and shops are sidelined ahead of year-end having "closed up trading in advance" of a potentially tumultuous year end in order to preserve profits (and or "bonuses, in cases where there are bonuses to be had.") The curve has sloped flatter in late trade.

1:12 pm - Auction Out: The market bumped a little bit better in the wake of an aution that was not quite up to snuff. The at-record $44B 2-yrs draw 0.802%, a 3.16 bid-to-cover with an indirect bidder take of 44.5%. Only a so-so showing and not very reflective of the anticipated demand for the shorter maturities. The solid bid-to-cover and indirect rate were there, but players were not as aggressive as they could have been, with the yield decidedly higher than expected, but as noted (12:02 comment), with rates at historic lows there was demand for a little more "pay back." The fact that the shortened week is stuffed with offerings with the record $42B 5-yrs hitting tomorrow and the $32B 7-yrs on the Wednesday.

12:46 pm - Leaning Lower: Treasuries remain under pressure with size very light ahead of the auction. The 10-yr has been knocking around the 3.38% yield level while the 2-yr has been stuck between 0.73% and 0.74%. The market is cautiously optimistic on the upcoming 2-yr auction with the fact that the shorter dated instruments are expected to be in shorter supply as the longer end sees added size in issuance as promised by officials. During the last 2-yr offering there had been talk of Treasury shifting supply out toward the longer end of the curve in order to lock in historic rates for the longer haul. It's been understood that this would be gradual, and with recent announcements they have pushed the longer end up to new sized records. The added supply will add further weight to the 5-and-7-yr auctions, although, again, for year-end and safety's sake, there should be continued demand. Trade has been very light as many take advantage of the shortened by Thanksgiving to take time off while Japan is out on holiday today. $44B saw 1.020% against an expected 1.045% with a 3.63 cover and a 44.5% indirect take. The previous 10 auctions on 2009 have seen an average 2.91 cover and 44% indirect bidder participation rate. The when-issued on the 2-yr equivalent is running 0.785% ahead of the offering. The curve has been pushed back to the flatter side of the day's range, but remains near the recent wides with the 2-10-yr yield spread running 264.9. The dollar is still under pressure but the index has managed to hold above the 75 handle as ongoing global accommodation and a rosier outlook has sucked out some of the safe-haven bids, The euro has failed again in taking out 1.50 decisively while holding better on the yen, working around the 133.50 level. The yen has been getting pushed back off toward Thursday levels on the buck, giving up about 89.15 per. Gold just keeps on tracking up to new record levels as the buck feels some heat, with spot tagging the 1174 point.

12:02 pm - Auction Up: The at-record $44B 2-yrs should go off well, with the year end looming and the safety players leaning to the shorter dated instruments to the point where they are willing to accept next to nothing to keep stashed cash safe into the new year. The previous $44B saw 1.020% against an expected 1.045% with a 3.63 cover and a 44.5% indirect take. The previous 10 auctions on 2009 have seen an average 2.91 cover and 44% indirect bidder participation rate. The flood of added issuance further out the calendar over the next 2 days may add a little pressure to this offering, but in general players expect things to go smoothly with perhaps a very slight tail against historic low yield levels.

11:38 am - Bills: Treasury sells $30B 3-mos at 0.040% with a 3.81 bid-to-cover ratio and $31B 6-mos at 0.140% with a 3.60 cover

11:29 am - On Offer: The dollar has been knocked off as the index slides 1.2% from Friday's best levels as the market resumes the risk trade as talk of the possibility of extending stimulus out of SL Fed's Bullard while officials in the eurozone talk of ending accommodation. The index has been backed-off to just under the 75.00 handle in a fairly steep drop and has been caught near the 75.05 area for the past hour or so. The euro was making plays for the elusive 1.50 point, but has been unable to clear the hurdle even as improved data in services pushed through along with talk of potentially higher rates added support. The yen has been on offer generally with the 89.00 level being toyed with on the buck and backing up to its worst levels since Thursday on the euro, giving up 133.35. Gold has remained on track for new record levels, trading to 1174.00 with spot now 1170.57 (19.97) while crude has also seen a fairly straight run higher, now 79.52 (+2.05) as an improved outlook helps boost demand expectations

11:11 am - Bills: Treasury will sell $32B 4-wks Tuesday

11:08 am - Fed-Up: Fed bought $2.017B of the $5.763B Submitted in agency debt in the 2011 to 2013 maturity range- DJ

10:59 am - Ticking Back: The market is trying to claw back some ground but the pressure is on with the boatload of supply on deck. The 3 day onslaught of issuance is likely to see diminished interest as the shortened week wears on. The 10-yr may see a push back toward the 3.425% yield ahead of the day's 2-yr offering, while the 2-yr should hold in the 0.73% to 0.74% area. Trade has been light and that will likely be the case for the remainder of the week even as the economic calendar is fairly well stuffed over the next 2 days. The market is getting mixed signals with Fed officials talking about extending or adding to mortgage related stimulus while in the EU officials talk of pulling back on accommodation, albeit gradually. Global bonds are generally offered with the bund hit as data points improve, but have pushed back some in the mid-session.

10:33 am - More Homes: First time credits helped goose the existing home sales as "Buyers were well aware of the potential monetary loss if they didn't buy before Nov 30, and as a result, rushed in during October to buy a home...Many home owners of higher priced homes have pulled their properties from the MLS listings as they wait for the market to improve. Most of the drop in supply was due to first-time homebuyers ...[with the credit extension] passed in November, we expect home sales to slow in the near future as: 1) buyers do not need to rush their purchase in order to obtain the tax credit and 2) demand for new homes may have been sopped up by artificially-induced sales."

10:15 am - Agencies: Fannie will sell $2B 3-mos and $1B 6-mos Wednesday

10:14 am - Agencies: Freddie sold $2B 3-mos at 0.057% and $1B 6-mos at 0.178%

10:10 am - Hotter Housing: The big 10.1% jump in the used home sales took the number back to early 2007 levels and saw a drop off in inventories to 7 months supply from 8. The distressed sales were a big chunk of the report with median prices sliding to $173.1K from $176K. The government credits and near record low mortgage rates have helped goose the housing world back from a fairly steady near 3 year long slump.  

09:58 am - On Sale: The market continues to lean lower with the long end leading while the shortest dated stuff continues to see buyers looking for safety into the new year. Trade is feeling drag as the general economic sentiment is improving, however slightly, and the idea that policy will continue to stay on the hardcore accommodative side well into 2010. The week's record $118B in 2-5-and-7-yrs is hitting in a holiday sliced up week with the 7-yr potentially hurt by the funky structure. Players will almost certainly show up for the 2-yrs, be a little less enthused on the 5-yrs while the 7s may be left out in the cold with the longer duration and the timing, hitting the day before the full holiday close and what will be, in effect, a virtual close on the shortened session Friday. Typically the Friday following Thanksgiving will see desks at skeletal staffing levels with the most junior players.

09:11 am - Under Pressure: Bonds are losing even more ground with the 10-yr off to yield over 3.4% for the first time in a week. The curve has been swung well steeper with the 2-10-yr yield spread near 267. The market is seeing  drag as global bonds slide and stocks move higher. The weight of supply may be balanced some by optimisim, as the general perceptioin is that the today's shorter dated offering will go off well enough, but there is a little more concern over the week's longer dated issues. The euro ios taking another run at the 1.50 point with it sights on 1.5015 or so.

08:34 am - Offered Ahead of Auctions: Bonds are gearing up, or down, as it were, for a batch of supply on top of data that is generally expected to improve. The market is awaiting an at-record $44B 2-yrs as well as a batch of the usual 3-and-6-mo bills. The data, existing home sales, is seen as higher as prices drop and foreclosures ramp higher. The market will be watching the auctions, being the first in a run up to record levels 5-and-7-yrs which have had a billion added to each offering, taking them to $42B and $32B respectively. The curve has been grinding a touch steeper, but should remain resume a flattening stance with the 2-10-yr yield spread 264.7. The dollar has been on offer with the index making stabs at the 75.00 level while talk of faster hikes in the eurozone weigh, with the regional currency still unable to take out the 1.50 point but working on it. The yen is holding near 89, after an a push to the best levels since 10/09 on the buck and through to Thursday levels on the euro, now giving 88.8755 and 133.07. The data have the used home sales (10) while the auctions have the $30B 3-mos and $31B 6-mos going (11:30) as well as the 2-yrs (13) while the usual 4-wk announcement may include cash management bills.

06:00 am - Treasuries are poised to open lower while equities are slated for a stronger open. The euro was considerably stronger vs the dollar and the yen was flat vs the dollar. On Sunday, St. Louis Fed President James Bullard said that the central bank should continue its mortgage-related asset purchase program beyond the planned end date. Existing home sales for October is due at 10:00. Consensus calls for 5.7 mln vs 5.57 mln prior. $30 bln in 3-month, $31 bln in 6-month Bills and $44 bln in 2-year Notes will be auctioned. The 2-10-year yield spread has widened to 265 from Friday afternoon's 263.3.