Terrorism prevailed over fundamentals on Thursday, propelling Treasuries higher in a couple waves. To blame were suicide bombings of British interests in Turkey and a brief flurry of excitement as U.S. fighter jets were scrambled after a flock of ducks violated Washington airspace and briefly shut the White House.
Data included a 15,000 drop in jobless claims to +355,000, followed by a 0.4% gain in leading indicators and a surprising dip in the Philly Fed index to 25.9 from 28. The weak tone in stocks inherited overnight, after 25 were killed in Istanbul and several hundred injured, spilled over onto Wall Street and gave Treasuries early impetus.
Mid-morning news that the White House was evacuated (though Bush was in London) propelled prices to session highs. A subsequent retracement after Washington radar turned up no hostile ducks was followed by another late upturn as the markets remained unsettled and stocks sank into the close.
The December bond closed up 28/32 at 110-30, while the 2-year note and 30-year bond spread remained pegged at +322 basis points. The dollar tumbled following the terror wave, but recovered as a wall of dollar bids ahead of $1.20 on the euro forced some short-covering. Greenspan and company warned against "creeping protectionism."