Treasuries ended sharply higher as shorts capitulated and large supply kept a swap bid in the market. The overnight foreign-exchange-linke Treasury rally that was sparked by the Bank of Japan's intervention persisted into New York.
Initial selling emerged, with a corporate bid list also weighing. But a highly regarded dealer investor survey confirmed the Street was net short. Coupled with a round of weaker-than-expected economic news and rate lock buying vs. several deal pricings, huge shorts capitulated. Forced in buying then underscored a grinding bid. While traders covered shorts, higher prices encouraged fresh longs as well.
Retail (domestic and foreign) was also forced in, with large Japanese buying seen in eurodollars. Swappers were among the larger buyers of eurodollars, and hedge funds stepped in, so as the locals scrambled, the front-end also surged.