News reports that Iraq would destroy its Al-Samoud 2 missiles caused a quick dive in bond prices, though Wall Street cheered. The shift back to a yellow alert status added momentum to stocks, and that depressed bonds further. But the downdraft in bonds was brief. Dip buyers stepped in to put a floor on the losses and lack of confirmation of the missile story stalled the rise in stocks.
Month-end demand gave the back-end of the bond market a boost and was the catalyst for a late turnaround in prices. A BBC story that Blix's weekend U.N. report would suggest dissatisfaction with Iraq added momentum to the trade. The short end tried to catch up as stocks faded into the close, but couldn't quite make it and the curve flattened slightly.