Tuesday's data exceeded expectations, but that was not enough to suppress some front-running of Friday's index extension bid. Throw in a return of risk aversion after terror threats against more U.K. interests in the Middle East and a foiled attempted bombing in Saudi Arabia, and you had a bullish cocktail for bonds.
This helped Treasuries shrug off an upwardly revised 8.2% gain in third-quarter GDP, which was burnished by a 10-point leap in consumer confidence to 91.7. The only data relief came from a lower than forecast 6.35 million unit pace on existing home sales. Treasuries rallied anyway, but there wasn't much conviction behind the move, with outright flows kept to a minimum.
The data is not so much the issue this week as is liquidity, book-squaring and perhaps some doubts about the sustainability of such a vigorous snap back in growth. On the options front, a large Midwest bank began to roll a sizable long-call position on March 10-year notes into a bearish put position.
The December bond closed up 18/32 at 110-26, while the 2-year note and 30-year bond spread finished 3 basis points wider at +319 basis points, thanks to a late spurt higher at the front end of the curve. San Francisco's Fed's Parry labelled the GDP gain as "sizzling" and said that he expected to see broad-based economic strength next year.