Lightly Lower: Treasuries limped through the session with little in the way of market moving information and a cautious, corrective trade keeping action in check while the mid-curve sagged. Supply and Fed-speak are holding players back, with many sidelined and keeping out of the lightly traded session. There is a batch of relevant events in the belly of the week with the auctions and the Bernanke testimony on "exit strategies" landing in the middle. The refunding starts tomorrow with the $40B 3-yrs hitting, followed by $25B 10-yrs Wednesday (also Bernanke day) and the $19B 30-yrs go Thursday. The market will likely remain within established ranges through to Tuesday, although they may lose further ground as the market makes room for the instruments coming up on offer through the week, but the ongoing worries over European problems should keep a floor under things. The curve ground its way a touch steeper from early in the session, ticking back to trade 280 on the 2-10-yr yield spread. The dollar slid some with the index holing up near 80.25 while the euro couldn't hold over 1.37 and was knocked back to 1.3670. The yen was listlessly lower on the buck and the euro but fairly flat most of the day. Tomorrow has just the minor wholesale inventories (10), expected to drop. Trade will be watching the 3-yr auction, which will follow the $24B 4-wks, and should go off decently. NY Fed's Dudley will speak late tonight (19) but there should be minimal headlines.

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