Treasuries Finish Higher
It was a one-way bet on Treasuries Wednesday, with yields tumbling across the board and the curve steepening as equity carnage continued to dominate the fixed income landscape. Trade prices and inventory data were broadly ignored as stock investors persisted in voting with their feet on the economic recovery.
Damaging disclosures were revealed early in the session that QWest was under criminal investigation by the Justice Department and that Vice President Cheney was facing a shareholder law suit led by Judicial Watch for his dealings in Halliburton stock.
The Dow cracked below 9000, 8900 and nearly 8800 for a 3% loss, dragging the rest of the market with it. The Treasury's $9 billion TIPS auction went well under the circumstance and this fuelled another wave of demand. The September bond closed nearly a point higher at 104-26, having touched the 105-handle on the session, while the two-year note and 30-year bond yield gap vaulted above the +275 basis point "psychological" area to post a three basis point gain on the day.
Oil prices surged on back-to-back bullish inventory data, with NYMEX August topping $27/barrel at one point, though this seemed to be more disturbing to stocks that rampant bonds.