Bonds Pare Losses
On the face of weaker-than-expected National Association of Purchasing Managers (NAPM) data, longer-dated issues were lightened on Wednesday but Treasuries soon found their way off lows as stocks faltered into the close.
To some extent, last minute revisionism after the weaker Chicago Purchasing Manager's Index on Tuesday blunted the impact of the lower 43.6% NAPM results. In addition, some signs of inventory stabilization were evident in the manufacturing survey. Construction spending declined 0.7% and domestic auto sales braked as well.
The September bond backtracked, but caught a bid from 103-14 session low to finish off -8/32 at 103-25. The cash curve held very steady around +172 basis points, while the two-year note garnered a late safety bid as Argentina markets convulsed again on domestic capital flight.
The Treasury's quarterly refunding came bang-on expectations at $27 billion, with lip service paid to the ongoing bond buyback, despite the temporary deterioration in the Q3 budget surplus.
NASDAQ held up on a Merrill Lynch upgrade of the semiconductor sector, but the Dow lost its legs into the close. Nearby crude oil rallied 42 cents to $26.80/barrel after API and EIA inventories fell.