Treasuries End Higher
Long end outperformance, the general theme of the week, continued again Thursday with the 30-year note tacking on nearly a point to Wednesday's heady gain.
The rally over the week left the yield on the bond at 5.43% compared to the Sept. 21 close of 5.83%. While the ongoing safe-haven bid, uncertainty over the geopolitical environment, and concerns over the economy, weakness in stocks, and slumping energy prices remained supportive for Treasuries in general, a number of other factors again contributed to the bullishness at the long end. Those included convexity trades, the flow out of mortgages and other spread product, front-running of quarter end needs, and less fears of fiscal largess.
Note that the gains were maintained despite a late rally in stocks which turned a 96-point loss into a better than 100-point gain. With the long end outperformance this week, the coupon curve has narrowed to +266-basis point area from +271 basis points.
Data were supportive, though not surprising, and there was little obvious reaction to weak durable goods numbers and a rise in initial claims. August home sales rose marginally, but from a downwardly revised July pace.
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