Treasuries End Slightly Higher

Treasuries pared gains as terror fears wore off and stocks recovered

Treasury futures, which jumped this morning as stocks fell on a heightened U.S. terror alert, are finishing well off their highs as stocks recover. The U.S. government said al-Qaeda may attack financial institutions in New York, Washington, D.C. and northern New Jersey.

But terror fears are wearing off, and optimism that the economy will recover from a June swoon is increasing. Earlier today, the Institute for Supply Management's factory index rose, while the Construction Spending index eased. Evidence of a strengthening economy prompts speculation that the Federal Reserve will raise its key interest rate again.

Some of pullback was options-related. One player bought 10,000 puts on 10-year futures. Traders are preparing for personal income and spending data Tuesday.

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