A very jittery Treasury market gained ground Tuesday as escalating Middle East maintained a safe-haven bid in bonds. While shorter dated instruments initially led the rally in a classical flight to quality trade, the long end eventually picked up steam and finished the session nearly a point higher. Outperformance in the short end further widened the coupon curve another four basis points to 215 basis points. That action came despite of the Treasury's announcement of $46 billion in cash management bills.
While a number of other factors contributed to the market's gyrations, including data, corporate supply, stocks, commodity prices, technicals and rumors, the underlying bid came from fear. Treasuries opened slightly weaker, despite overnight declines in stocks. Launching of two jumbo corporate deals ($7 billion total) pressured bond slightly. But it wasn't long before the safety bid gave bonds a boost. A weaker than expected factory orders report added to demand.
News wire reports of an alert at a Georgia nuclear plant sparked size buying in 10-year notes, and technicals extended the rally into the close.