From the get-go it was a story of new beginnings and a chunky opener for stocks, with optimism also fanned by the lack of terror events over the global holiday. Indeed, major indices broke back above their respective 50-day moving average lines after 3% gains. Bush also announced preemptively that his stimulus plan would be detailed next week. Two-year yields were initially affected most, surging 20 basis points from their record low close on the last day of 2002 to 1.78%. 10-year yields backed up 25 basis points to 4.05% and the cash bond yield climbed 20 basis points to 4.97%, having shed three points at one stage.
The curve initially flattened as some risk premium evaporated from the front-end, but the two-year note and 30-year bond spread closed two basis points steeper at +317 basis points. The belly underperformed. The March bond closed 2-17/32 lower at 110-04. From three-year lows the dollar rallied 1%.