Treasuries ended lower after a report the U.S. trade deficit narrowed to $18.7 billion in September from $27.1 billion in August. The narrowing largely reflects reinsurance payments from September 11, however, which should be a one-off effect, Standard & Poor's MMS says. Imports plunged 11%, reflecting the reinsurance payments, while exports fell 8.5%. This narrowing in the deficit will suggest an upward revision to third quarter gross domestic product (GDP), but the market is likely to take this in stride.
In other economic news, U.S. leading indicators rose 0.3% in October after a 0.5% decline in September (unrevised). This is the first increase since July. Seven of the ten components were positive. The number is a little stronger than many had been anticipating and may take a little of the steam out of the short end of the Treasury curve.
MMS says the upside for the season certainly appears to be limited, given the deterioration in consumer fundamentals, which has been exacerbated by the September 11 attacks. But, as the October retail sales data clearly imply, the consumer has remained surprisingly resilient despite recent challenges.