Japanese Buying Fuels Bond Gains

February payroll data could rouse treasuries on Friday

The sorry state of affairs in Japan drew some attention away from the slowdown stateside Thursday, helping to inject a "safety" bid into the long-end as the rest of the curve absorbed agency supply. Tacit approval of a weaker yen Wednesday and Fin Min Miyazawa comments overnight that Japan's fiscal house was near a "state of collapse" fueled Japan investor demand for T-notes and bonds, unusual during New York morning hours, which lagged a chunky dollar bid to 20-month highs in Tokyo to Y120.40. Freddie Mac sold $10 billion in 2s and 5s, generating interest from Asian accounts, while a hedge fund bid 2s/5s with borrowed yen.

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