The U.S. trade gap narrowed 8.4% to $41.1 billion in January, amid rising oil prices and the weakening dollar, but this was mostly of momentary relief to the buck. The June bond closed up 11/32 at 115-20, the only contract to finish in positive territory. The unwinding of curve steepeners, while the wrangling on Iraq continues and players set up for the aftermath, dominated the session. The two-year note and 30-year bond spread accordingly collapsed 10 basis points to +317 basis points, perhaps in anticipation of the war premium being liquidated soon. U.S. stocks managed to close in the green, despite the plunge across European exchanges.