It was a good day all around for U.S. financial markets, with bonds, stocks, and the dollar generally firmer. With power finally restored to the Northeast, Treasuries finished unchanged to higher in a technically dominated, corrective trade following last week's dislocations. Intermediate and longer dated notes outperformed -- the 10-year note found support at 4.50% and shorts covered. Investors also found new courage to move out the curve in search of higher yields amid a lack of inflation concerns.
Meanwhile, mortgage-related selling has apparently dried up, taking a lot of the pressure off the market as well. The short end, however, continued to feel the pinch from expectations of a stronger third-quarter economy and the potential for a rate hike sooner rather than later. The curve came in further as last week's steepeners were still being unwound.
The 2-year note and 30-year bond spread narrowed about 9 basis points on the day to the +350 basis points area. Amid such corrective action, a solid day on Wall Street was not an impediment to bonds. The Nasdaq extended recent gains, climbing nearly 2% on a solid outlook for the technology sector and positive fundamentals. The dollar also had a good day, boosted by expectations for strong U.S. growth and concerns about European growth.