The usual Friday madness was used up on Thursday, which began orderly enough with a low-volume recovery on Treasuries set in motion by damp data, more dovish Fedspeak and the bond buyback. But news of a plane slamming into a Milan skyscraper provided a haunting image of September 11, which triggered reflexive gains along the curve and losses on Wall Street.
It was all a wash in the end, however, in terms of price action after initial evidence suggested the event was just a horrible accident and not another terror plot. Prior to that catalyst, continuing claims hit fresh 18-year highs and an 0.1% gain in leading indicators proved friendly. After the crash the June and cash bond gained nearly a point and the front-end outperformed, but much of this was given back by the close.
The June bond closed up 7/32 at 100-10/32, while the two-year note and 30-year bond spread closed slightly wider at +238 basis points. The Philly Fed index also gained to 12.3 and the March Treasury budget deficit grew to $64.2 billion, though these were ignored after all the tumult. New York Fed's McDonough mostly echoed Greenspan's concerns about second half growth.