Treasuries finished a choppy Thursday session marginally higher thanks to month-end index and dip buying. But it was a rocky course as geopolitical factors continued to give the markets the run-around. The bond market opened higher on extension of the safe-haven trade as the hawkish tone in President Bush's speech Wednesday night added to war fears. Data remained secondary, and had little impact as a 3.3% jump in durable goods orders was offset by an 11,000 rise in initial claims.
News reports that Iraq would destroy its Al-Samoud 2 missiles caused a quick dive in bond prices, though Wall Street cheered. The shift back to a yellow alert status added momentum to stocks, and that depressed bonds further. But the downdraft in bonds was brief. Dip buyers stepped in to put a floor on the losses and lack of confirmation of the missile story stalled the rise in stocks.
Month-end demand gave the back-end of the bond market a boost and was the catalyst for a late turnaround in prices. A BBC story that Blix's weekend U.N. report would suggest dissatisfaction with Iraq added momentum to the trade. The short end tried to catch up as stocks faded into the close, but couldn't quite make it and the curve flattened slightly.