Treasuries End Higher

Economic data provides a catalyst

Thursday was an "inside" day technically for Treasuries, which licked their wounds. In a lightly traded, but positive set-up for payrolls Friday, the belly of the curve outperformed after digesting a flurry of new year non-governmental issuance.

Data also provided a catalyst for early gains, with year-end jobless claims surging 36K to 447K and the MBA mortgage market index plunging 39.9% -- both data sets are seasonally volatile. A surprise 0.8% gain in November construction spending damped enthusiasm only briefly, since the October gain was revised down sharply. The March bond found traction ahead of par and closed up 13/32 at 100-17, while the curve held steady around +237bp.

Goldman christened the corporate market with an over-subscribed $2.75 bln 10-year deal, followed closely by a Lehman $1 billion 10-year and $3 billion each by the IBRD and FHLB in the 3-year sector -- for a total of nearly $10 billion in fresh supply. But hedge lock unwinds and the data helped support Treasuries, despite stocks extending their January bull run. Car sales disappointed, but trucks accelerated.

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