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Both Treasuries and stocks experienced an aimless session as Allied troops jockeyed for position around Baghdad and Friday payrolls data approached, trading places a couple of times and finishing close to where they began. The curve steepened back out to fresh 11-year wides and Eurodollar futures had a good day, as the military campaign embarked on a high stakes end-game.
Allies seized the Saddam International Airport, though speculation overnight was that Iraqi leader already punched his one-way ticket to Syria. The session was confounded partly by the downing of a Black Hawk helicopter and more friendly-fire incidents in the air, though the relentless advance on the capital and lack of chemical weapon deployment offset the bad news.
The Pentagon warned on a more "lethal" phase ahead for U.S. troops, which kept the markets jumpy. Data was friendly, with claims up 38,000 and ISM services down to 47.9. The June bond shed 1/32 to close in the red at 111-16, while the 2-year note and 30-year bond spread nearly topped +340 basis points for a gain of 4 basis points.
All other maturities closed well in the green. Among fear proxies, gold sank $5 to +325/oz, while crude oil traded nervously around $29/bbl. Fedspeak was benign and Greenspan stayed off the topic of policy.