It took all day, but a choppy Treasury market finally found its footing as equities slipped decisively lower. The long bond finished almost a point higher on the day after muddling through most of the session in a sloppy range-trade.
Indeed, neither bonds nor stocks made any headway early on -- both markets chopped erratically around unchanged levels into the afternoon given no new news to go on. However, the curve generally maintained a steeper slope. The 25,000 drop in initial jobless claims was quickly dismissed as a statistical quirk and the 2-year recovered from its knee jerk lower. The long end was pressured by black box selling. Once those moves were exhausted, traders moved to the sidelines to monitor gyrations in equities.
The mixed nature of the key indexes left Treasuries without a compass, but the late move south restored demand in Treasuries. Sources suggested an overbought Wall Street was rattled by news Iraq was expelling journalists. The late-day sell off chopped over 2% off the Dow and provided the ultimate lift to bonds. An increased corporate pipeline had little impact, even ahead of next week's refunding announcement. Traders also await a heavy economic calendar Friday, with most data expected to be soft.