Treasuries Decline on Stable Jobless Claims

Prospects of the war drawing to a close also added hopeful signs to the economy, which pushed bonds lower

Wednesday's rout turned into Thursday's capitulation as a whole host of factors sent stale longs running for cover. The entire curve buckled, though losses were led by the front-end, which suffered the heaviest damage. By the time the market settled, the 30-year bond shed three points, 10-year notes shed two points, five-year notes lost one point and two-year notes fell a half point. Stable claims and a less weak Philly Fed index provided more evidence for those mindful of a cyclical rebound, though the inventory/sales ratio surged to 1.45 from 1.42. No one catalyst was cited for the deep declines that drove up yields sharply, though the laundry list was as follows: ebbing war premium, hopeful signs on the economy, allocation to higher yielding assets (corporates, etc.), supply, risk of reduced Fed easing ahead and fund technical selling. As a result a climactic plunge in prices swept out even die hard bulls. The Pentagon confirmed that several Taliban leaders were killed by bombing around Kabul and Kandahar. AT&T priced a $10 bln 5-part deal and there were many willing sellers for the $1.75 billion bond buyback. Yet, San Francisco's Fed's Parry would not rule out more cuts.

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