Treasuries Rise on Benign Data

A lower-than-expected rise in the Consumer Price Index suggested inflation remains calm, spurring Treasuries

Greenspan and the markets stared eye-to-eye Tuesday after the Fed's fifth straight 50 basis-point rate cut, but on Wednesday stocks blinked.

The Fed's unprecedented message was to restore faith in capital spending and business confidence to avoid a broader recession, and following benign April Consumer Price Index (CPI) results and respectable housing starts that message was driven home Wednesday.

The Dow cleared 11,000 (+2.7%) with one bound and coiled to test all-time highs of 11,401 set back on September 6, 2000, while the S&P 500 broke free of its range top at 1,272 and the Nasdaq skipped higher ahead of its 50-day moving average at 1990.

Even the long bond carved back some of Tuesday's losses, finishing 21/32 higher at 93-06, helped by short covering following the tame 0.2% core CPI result. The June bond bumped into par, but found support ahead of 99.

Cash 2s and 5s were active, but mostly underwater as issuance in the front/mid-curve continued to be shopped and priced. A seller of 40,000 September euro dollar futures via three heavy hitting shops foreshadowed the asset allocation shift. The 2s/30s spread narrowed back from the +170-basis-point area to +163-basis-points.

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