Treasuries bulls were out in force Tuesday. The advent of Secretary of State Powell's U.N. Security Council testimony weighed heavily on stocks and reignited a safety bid in bonds. Bond prices closed at or near their highs for the day, with the 30-year bond the up 24/32 at 108-30 (4.79%). But it was the beleaguered five-year note that paced the day's gains, overcoming the supply woes of late.
Indeed, shorts covered and the yield on the intermediate note fell seven basis points to 2.907% after Monday's quarterly financing announcement from the Treasury suggested debt managers aren't likely to announce a switch to a monthly five-year auction as soon as Wednesday. There was heavy buying (40,000 to 60,000) of June 109+ five-year puts at the start of the day, perhaps hedging a long position in that sector.
Meanwhile, the impending threat of war not only rekindled the a flight to safety bid, as evidenced by a strong four-week bill auction, and an $8.30 surge in gold prices (to $379.90), but also weighed heavily on equities. The Nasdaq cracked the 1300 support level and tumbled to 1292.2 before finding support.
Neither factory orders data nor the Challenger job cut report impacted.