The only blight on the economic feast was new-home sales, which sank 3.5% to a 1.105 million unit pace, cooling off from overcooked levels. Treasuries began the session underwater, burdened by expectations from the data and a stock rally overseas, but initially the long-end rallied back in anticipation of index duration extensions on Friday.
The short-end underperformed into the $26 billion 2-year auction, which met implied fears of a poor sale. Foreign central bank demand was only 33.0%, vs. 45% of late, though these national institutions have been good buyers in the belly of late. The Fed's Beige Book economic survey anointed the recovery with the title of a "broadly based expansion."
There was a little dollar and stock turmoil after a New York subway odor incident was misdiagnosed as a terror attempt. The December bond closed down 18/32 at 110-07, while the 2-year note and 30-year bond spread narrowed 4 basis points to +315 basis points.