Bonds Move Higher on Friendly Data

Treasuries lagged initially, then rallied hard until some profit taking set in

Right out of the gate Wednesday, tempered U.S. data put the markets in good spirits. News that core CPI rose merely 0.1% and softer IP data helped send the oversold Nasdaq up 5% to test its 2767 50-day moving average along with a better batch of tech earnings announcements and Intel's plans to boost capex 12% this year.

Treasuries lagged initially, then joined the fun, rallying hard in a couple waves until some profit taking set in into the close. After some early steepening and light "black box" model fund buying at the front end, buy-stops on the Mar bond were tripped at 103-18. Another catalyst came from Tsy Sec-designate O'Neill who talked up fiscal virtue and the strong dollar along with Bush's tax cuts, arguing for continuity with his predecessors. This sparked a run past 104-00/03 trendline resis to 104-12 session highs.

Announcements of a larger than hoped $1.75 bln buyback also buoyed the market and the $10 2-year note auction didn't hurt the front end long. Rolling blackouts struck California, cooling NASDAQ's ardor into the close. Upsized corporate issuance was readily absorbed.

Before it's here, it's on the Bloomberg Terminal.