It was a wildly volatile trading session, with Greenspan the highlight. The FOMC Chairman soothed some of the market's fears, emphasizing that rates will rise, but declining to say by how much or when. He eased inflation fears, saying there weren't any.
Thus, massive short covering and outright retail buying emerged. Retail buying was concentrated in the front end, with mortgage and swap-related buying seen out the curve. Large flatteners came undone, and Eurodollars saw huge purchases (mostly short covering). Fed Futures priced out some rate hike expectations near term, but August Fed Futures still price in a 100% probability of a hike.
Prices pared nearly all losses, but Parry suggested rates will have go up significantly, reversing again into negative territory. The Beige Book was no surprise, so prices rallied into the close.