Treasuries Finish Stronger

Longer-dated issues got a big boost amid speculation that the Fed wouldn't raise interest rates anytime soon

Treasuries moved sideways early on, but then rallied, with prices moving higher by the close. Initially light flows were dominated by the pick-up in corporate and agency supply. The drop in weekly jobless claims was ignored.

Retail flow was mixed. Speculation that the Fed would sit tight on interest rates also underscored a bid, cancelling out the pullback on yet another Bin Laden capture rumor. By noon a strong bid emerged, with long-end buying linked to rate-lock unwinding ahead of the $500 million 30-year Procter & Gamble pricing. Further dollar weakness also resurrected foreign-exchange intervention speculation, a move that would likely spur U.S. Treasury buying overseas.

The break below 4% again in 10-year notes forced in buyers, and front-end Eurodollar buying picked up following the slide in technology stocks. Retail booked profits at the highs, but the bid persisted into the close.

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