Treasuries Finish Higher

Demand for Treasuries rose as it became clear that President Bush's economy-boosting plan would have a slow effect on growth

Treasuries belted higher again, thanks to the stock hangover from the Bush stimulus plan and several downbeat tech sector comments. The curve extended its steeper profile amid the stock weakness and lingering risk aversion, with the front-end powering ahead and sending yields lower across the board.

Traders bought treasuries on expectations that the President's plan wouldn't add quick-fix growth to the economy -- or to the federal budget deficit, which is financed by supplying more government debt. The flood of corporate and agency issuance continued to wash through the market, but the warm reception by investors for spread product appeared to lift all boats, including Treasuries.

Oil fell sharply at the beginning of the session, briefly to month lows below $30/bbl after DoE inventory data showed an unexpected build, on top of OPEC plans to up production. Gold benefitted from an inexplicable wave of dollar weakness, picked up by fund buying from $345/oz back up to $353. The dollar trade-weighted index tumbled below 101.50 from 102.70, the lowest level in three years, amid talk of cascading sell-stops and possible real money selling.

U.S. consumer credit plunged 1.5%, the first drop in four years, but this decline could reflect refinancing windfalls put to work paring personal debt. The March bond closed up 22/32 at 111-02, two-year yields fell below 1.70%, with the 30-year below 4.92% and the two-year note and 30-year bond spread widened three basis points to +322 basis points.

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