Bonds started the session on the heavy side as recent short-end weakness was extended to the long end. Losses were magnified as equities looked to put in a healthy. Though bottom-fishers helped contain the early weakness, sellers maintained the upper hand.
The break of key support levels exacerbated the slide. A better-than-expected rebound in the Philly Fed data, especially within the expectations component, and comments from a number of Fed officials who toed Greenspan's line (McTeer suggested we were near the bottom of a "V" shaped recovery) tortured the bond further. Supply kept the belly of the curve under water.
Fed funds futures fell hard, reflecting diminishing risk (about 38%) of a 50- basis point cut at the March FOMC meeting.