Amid the cacophony of war/terror noise, a fresh dollop of $2 billion five-year corporate supply from Citigroup created hardly a ripple, though there was a lot of option activity in the same maturity area over the course of the session. The U.S. also accused Iraq of plotting a scorched earth policy on its oil wells, if attacked and Nymex March crude shot over a dollar higher to $33.37 per barrel. This added further insult to injury on stocks, while only profit-taking took Treasuries down a peg by the close.
The March bond closed 26/32 higher at 112-12, off the best levels of 112-28 posted at the height of war fever. The two-year note and 30-year bond spread flattened one basis point to +322 basis point, perhaps the start of a set-up for the two-year note auction next week. The dollar tanked to fresh 38-month lows.