Treasuries fell as the allies advanced to the outskirts of Baghdad with limited resistance, and as Private Jessica Lynch, an American prisoner of war, was rescued. A benign end to the San Jose SARS incident, and speculation over Saddam's missed TV appearance Tuesday aslo helped to pull down Treasury prices.
Though the probability of a regime change promoted the asset allocation shift, some remaining caution limited bond selling as a more dangerous phase of the war began and the risk of use of chemical weapons increased. The capture of a key dam in central Iraq that could have been used to flood the areas around Baghdad, however, was a positive offset.
Factory orders fell 1.5% in February, but armchair Generals ignored the damp data. The June bond fell 1-6/32 to 111-18, while the 2-year note and 30-year bond spread recovered from a 4 basis point dip to +331 basis point back up to +335 basis point. The belly of the curve underperformed on modest convexity-related selling.