Treasuries lagged initially, then joined the fun, rallying hard in a couple waves until some profit taking set in into the close. After some early steepening and light "black box" model fund buying at the front end, buy-stops on the Mar bond were tripped at 103-18. Another catalyst came from Tsy Sec-designate O'Neill who talked up fiscal virtue and the strong dollar along with Bush's tax cuts, arguing for continuity with his predecessors. This sparked a run past 104-00/03 trendline resis to 104-12 session highs.
Announcements of a larger than hoped $1.75 bln buyback also buoyed the market and the $10 2-year note auction didn't hurt the front end long. Rolling blackouts struck California, cooling NASDAQ's ardor into the close. Upsized corporate issuance was readily absorbed.