Treasuries continued to make impressive gains on Wednesday, closing at or just shy of multi-decade and all-time highs, even though there was little new news to go on. Rather, investors and dealers alike sought the safety and liquidity of the government bond market as equities continued to crash (-2.8% on the Dow), geopolitical concerns remained high, and the economy's rebound was doubted.
Meanwhile, credit concerns are joining the black list with corporate spreads widening to new record wides. News that J.P. Morgan Chase was downgraded by Moody's, along with lingering rumors of financial institutions or fund(s) in trouble, exacerbated investor jitters.
Money flowed into Treasuries across the curve. Initially it was the belly of the curve that led the rally, taking up the baton from the long end which had previously grabbed it from the short end. Amidst this bullishness, the Treasury's small $7 billion TIPS auction was suprisingly weak. Apparently the richness of the market and lack of a diverse audience made for a very weak auction. The notes were awarded at an historic low 2.26%, which resulted in a record low 1.36 bid cover. There was no data or Fedspeak to distract.