These worries caused modest reflexive gains on Treasuries and indigestion on stocks, which fell 2% to 3% on average. Stocks crumbled after news the Tyco chief had resigned, El Paso Energy's Treasurer committed suicide and that Knight Trading initiated an accidental sell order against itself.
The dollar tumbled again, caught between Kashmir and reports in Europe that Germany and Russia might join forces to trade oil in euros. The September bond closed up 2/32 at 101-06. The curve initially flattened and the two-year note and 30-year bond spread narrowed below +240 basis points after weekend event risk passed without incident, but reports that Indian and Pakistan leaders would scrupulously avoid each other at a Kazahkstan conference Tuesday helped it close above +246 basis points.