960425

Debt futures

down after

setting lows

CHICAGO: U.S. debt futures ended down after sliding to new daily lows lateon Wednesdsay.

Traders attributed the June T-bond USM6 drop to 109-23/32 and the December Eurodollars EDZ6 fall to 94.09 to local selling.

While the five-year note auction was considered a modest succcess, traders and analysts said there were still underlying concerns about supply.

"Locals must have been uncomfortable about it, considering some were really long at the 110-13/32 level (in June T-bonds)," one floor trader said.

He noted that one large European bank in a swap-related deal was a major buyer in the Treasury's five-year note sale.

However, lingering concerns about supply were felt, as large firms and money managers continued to shorten the duration of their instruments. One large institution was reportedly a good seller of bonds and buyer of notes.

"People are looking for a steeper yield curve based on the information we have right now," one analyst said, referring to the sharp rise in the Commodity Research Bureau's index.

"Commodities will remain on the front burner," one trader said.

Barrett Lewald, senior financial futures analyst with Lind-Waldock Inc, said the lack of follow-through buying after June rallied above a trendline Monday continues to dampen the short-term outlook.

"Whether or not June will close above 110-10/32 by Friday will be a key factor," he said. June bonds fell to 109-20/32 in Project A..At the end of pit trade, June T-bonds were down 16/32 at 109-24/32, 10-year notes off 9/32 at 107-28/32, munibonds were 9/32 lower at 111-30/32, December T-bills down five basis points at 94.61 and Eurodollars were off four bps at 94.10.-Reuter