Treasuries End Lower
After setting session highs early in Thursday's session, Treasuries never quite recovered their poise, amid defensive curve flattening. They got off to a bad start after dipping on the 38,000 drop in jobless claims and the narrower trade deficit, with the short-end of the curve leading the way lower. Rumors of an intermeeting Fed cut attributed to a Washington-based advisor were not widely circulated and seemed to be contradicted by recent comments from Fed Vice Chairman Ferguson and even Chairman Greenspan, who said overnight that the U.S. economic system was "more prone to economic growth than stagnation." Outright flows included some selling of NOBs (10-year notes for bonds) and sales in the belly of the curve.
The fluid situation in Iraq kept both stocks and bonds on tenterhooks, with four marines wounded by a suicide bomber, murders of Shiite Muslim clerics and potential discoveries of weapons-grade plutonium and a rolling bio-weapons lab. The June bond closed 11/32 lower at 111-23, while the 2-year note and 30-year bond spread narrowed 5 basis points to +333 basis points.
Fed governor Bies said that with Baghdad under Allied control, the focus could return to business and the economy, while Fed Governor Olsen stuck to the topic of the capital accords.
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