The two-year note and 30-year bond spread initially narrowed four basis points to +312, but closed at +315 basis points after the back-end of the curve was dragged down as well, though losses were cut by the end of the session as stocks failed and the March bond closed just 4/32 lower at 110-26.
Income/PCE data (+0.3%, +0.5%) came in above expectations, though the latter continues to outstrip the former. U. Michigan household sentiment was revised slightly lower to 86.7.
Iraq offered some vague verbal concessions on inspections, but the U.S. conducted its largest military exercise in Kuwait since the Gulf War. A Congressman also requested release of U.S. oil reserves after oil topped $32 a barrel and two-year highs, admitting two Gulf refineries could soon go dry.