There was no lack of fodder on the terror front, with London locking itself down for a potential Stinger missile attack on Heathrow or bomb in the Underground, Washington and New York running out of duct tape and other emergency supplies, and assorted terror rumors. Talk circulated of an incident on the Whitestone bridge in New York, suspicious activity in Washington (not just the Congressmen interrogating Greenspan on the Hill) and a false report of a boosted "red" or severe terror threat level stateside.
Yet authorities around the globe were clearly taking risks seriously after the Bin Laden tape and recent verbal terror traffic, and so did the markets. U.S. stock indices closed nearly 1% lower, while European markets settled 2% to 2.5% down. The March bond closed up 12/32 at 112-23, while five-year notes outperformed. The two-year note and 30-year bond spread closed two basis points wider at +324 basis points, boosted by elevated risk aversion.