Labor data was relatively friendly, with a 7,000 gain in initial jobless claims, but the initial spark came from a very dovish reading of yesterday's testimony by Washington Post Fedwatcher Berry. This gave some respite the front-end, which had weakened after intermeeting Fed cut hopes were dimmed.
Flows were light ahead of the long weekend, with persistent Asian demand at the front-end reported. Some volume selling on 10-year notes also kicked in, front-running time decay as prices backed and filled Wednesday's late correction. Late in the session the U.S. closed its Olso embassy due to an apparent terrorist threat, adding a safe-haven bid to the mix.
The June bond closed up 24/32 at 121-05, while the 2-year note and 30-year bond spread sank 5 basis points to +295 basis points.
Fed's Olsen anticipated robust future growth, but worried about sluggish capital spending. The Nasdaq closed above 1500, gaining 1.1%, helped partly by agreement on a $350 billion tax cut. Treasury postponed the bill and 2-year note announcements.