This masked relatively buoyant U.S. data, which caused only a brief wince in Treasury prices. Ex-auto retail sales rose 1.3% and back-data was revised higher, import prices surged 1.5% thanks to oil and the weak dollar, while initial claims tumbled 18,000 to 377,000. Two North Africans were arrested outside Heathrow, and a live grenade was found on a flight into Gatwick from Columbia, though both events were not ostesibly linked to the airline missile threat.
This sent prices at the front-end of the curve sharply higher and two-year yields to record lows of 1.52%. The belly of the curve continued to outperform following the distribution of the quarterly refunding of 5-year and 10-year paper. The approach of the long weekend brought forward a frenzy of activity, with the March bond closing up 23/32 at 113-13, though off highs of 114-07 after a bout of late profit-taking. The two-year note and 30-year bond spread gained another basis point to +325 basis points.