Bond futures hit Summer highs Thursday, but stocks pulled out of a consecutive swan dive and appeared a just a tad sold out. Initial Treasury gains were supported by the data, with mostly benign PPI and a seasonal jump in claims back above 400,000.
An apparent mortgage-related convexity bid as yields fell actually compounded early gains in the belly of the curve, even before the data and stocks had a chance to influence the curve. The September bond rallied over a point at this stage to just shy of 106, but it closed up only 10/32 at 105-03. The cash curve finished flat, but prices continued to erode after the futures close as the Nasdaq led stocks back into the green and successfully reversed a 2% deficit.
Chatter about an upgrade in the chips sector and a strong day for Cisco rival Juniper Networks helped fuel the equity rebound along with bullish late comments from Morgan bear Barton Biggs, who warned against selling stocks.
The yield curve still finished relatively steep, up one basis poin at +276 basis points, as cynical stock investors still appeared to be hedging their bets.
The CRB closed above 213 at year-highs thanks to gains in softs, livestock and precious metals. The dollar stumbled, then recovered some of its losses.