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Treasuries made the most out of another stumble on Wall Street and an early spate of month-end demand that provided the antidote to mostly firm-but-tainted data. Weekly jobless claims plunged 19,000 to 381,000, but at least half of that decline was related to filers kept at bay by Hurricane Isabel.
Likewise, durable goods orders surprisingly fell 0.9% in August, but an upward revision in July and distortions from the Northeast blackouts suggested the results were understated. Home-sales data was also resolutely strong, with new homes up 3.4% and existing homes up 5.5%.
The Lehman bond index extends by 0.17 on Friday and as the market adjusts for another round of 5-year notes and 10-year notes duration will have to be tweaked. There were also reports of mortgage firms rolling up call strikes.
Fedspeak continued to be upbeat on the economy, but the market didn't find remarks from McTeer, Minehan, and Poole intimidating. A slew of negative press on housing agencies had limited impact on agency spreads, though swaps pushed wider.
The December bond closed up 17/32 at 110-09, while the 2-year note and 30-year bond spread flattened about 8 basis points to +334 basis points, mostly due to the "When Issued" roll on the new 2-year notes.