Treasuries recovered some poise at the expense of stocks Thursday, rebounding sharply and ending a three-day selloff. It was an orderly ascent rather than a mad scramble that left prices near intraday highs by session close, while the curve actually flattened modestly. Data was not especially instrumental, with jobless claims falling 9,000, to 424,000 and first-quarter GDP revised up less than expected to 1.9% from 1.6%.
The Chicago Fed's National Activity index fell to -0.85 from -0.69, however, consistent with a 70% chance of a double-dip recession. Though not closely tracked, this could have given fresh impetus to deflation bets. A repeat of largely dovish remarks from San Francisco Fed's Parry didn't have the same positive impact on the front-end that it had overnight, as the market digested $25 billion in new two-year notes. The September bond closed up 1-2/32 at 119-10, while the 2-year note and 30-year bond spread narrowed 4 basis points to +307 basis points.
Prices in the belly of the curve outstripped the rest, led by the benchmark 10-year note. The DJIA traded heavily (-1%), dampening the spirits of the other broader stock indices and supporting the underlying bid in Treasuries. The dollar took exception to damp stocks, tepid data, and light Ascension holiday liquidity in Europe.