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Treasuries made out with mild gains Tuesday, though the front-end was left cold by Fedspeak that laid the groundwork for an exit strategy from the "considerable period" reference. Data was relatively tame, with soft weekly retail sales figures, benign core CPI at +0.2% and a dip in the NAHB Housing index to 69.
The market had been relatively indifferent to the mild data, which went against the grain of recent releases, thanks to the more hawkish tone of the day's Fed speakers. But, the dollar had a dreadful session and the euro broke through its inaugural highs of $1.1932 to hit $1.1959, helping rekindle a modest safety bid in bonds as stocks declined.
Stop-loss selling on the dollar emerged on rising fears over protectionism, the mutual fund scandal and new details over housing agency Freddie Mac's accounting probe that implicated two investment banks. San Francisco's Fed's Parry and Phiadelphia's Fed's Santomero hinted that there were time limits on Fed accommodation. Corporate borrowers must have picked up on the verbal signals, since the pace of issuance sped up dramatically.
The December bond closed up 10/32 at 110-31, while the 2-year note and 30-year bond spread flattened 3 basis points to +322 basis points . Gold recovered $7 and made another stab at $400 an ounce.