Treasuries Finish Stronger on a Safety Bid

Geopolitical tensions, ongoing reports from the terror and war fronts, and panicky stock markets fueled Treasuries

Did anyone notice it was the 13th today? From the panicky flight bid in Treasuries, a round trip into the red on stocks and choppy dollar trade, it would appear so. Various arrests in heavily-policed London area airports kept tension high and weighed on stocks until late in the session.

This masked relatively buoyant U.S. data, which caused only a brief wince in Treasury prices. Ex-auto retail sales rose 1.3% and back-data was revised higher, import prices surged 1.5% thanks to oil and the weak dollar, while initial claims tumbled 18,000 to 377,000. Two North Africans were arrested outside Heathrow, and a live grenade was found on a flight into Gatwick from Columbia, though both events were not ostesibly linked to the airline missile threat.

This sent prices at the front-end of the curve sharply higher and two-year yields to record lows of 1.52%. The belly of the curve continued to outperform following the distribution of the quarterly refunding of 5-year and 10-year paper. The approach of the long weekend brought forward a frenzy of activity, with the March bond closing up 23/32 at 113-13, though off highs of 114-07 after a bout of late profit-taking. The two-year note and 30-year bond spread gained another basis point to +325 basis points.

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