The curve briefly shed some of its recent steepness following rebounds in leading indicators, the Chicago Fed National Activity Index and the Philly Fed, but finished as steep as it began. Seasonally distorted initial claims fell back only a disappointing 11,000 to 433,000. Treasuries overcame all these obstacles, rallying furiously ahead of the close on Powell's stern rhetoric that Iraq had largely "recycled" previous inspection documents and comments from the U.S. Ambassador to the U.N. that Iraq was in "material breach" of its U.N. obligations.
Dealers were compelled to trade Treasuries from the long side, with leveraged demand for five-year notes and 10-year notes noted supporting the belly perhaps ahead of expected convexity hedging. The March bond closed just over a point higher at 110-29, while the two-year note and 30-year bond spread finished unchanged at +319 basis points.