Treasuries finally blew out their range top Wednesday to the highest price levels and lowest yields since late February. The catalyst was certainly neither the data nor events, which were absent, but the latest earnings woes on Wall St and the flood of risk aversion that accompanied more bombings in Israel and the predictable response.
Though gains were substantial across the curve, steepening continued to prevail in the wake the cancelled 2-year auction announcement. The bearish tone on equities was set by warnings late Tuesday from tech stalwarts Oracle, AMD, Apple and Ciena, and shares never really recovered--closing down 1.5-3.0%.
The September bond made the most of these doubts, closing 1-4/32 higher at 104-10, while the two-year note and 30-year bond spread widened four basis points to +261 basis points. There was some lingering talk of a Fed ease, which had surfaced Monday in a research report and Dec euro$ set fresh contract highs of 97.66 enroute to the next key 97.75 psych resistance.
The trade-weighted dollar index tumbled below 110 to the lowest level in 17-months. Rumors continued to swirl that a large bond fund was buying euros and bolstering its European portfolio.