The long-end had rallied ahead of the news as stocks came off the rails on another earnings warning and job cuts from Intel. But the June bond wilted after failing to clear 106 all the way back briefly below 105. The June bond buoyed back to 105-13 into the close as NASDAQ (-4.5%) and Intel's disease dragged stocks broadly lower and Cisco also confirmed it would slash staff 11%.
The curve flattened slightly, with selling in the middle of the curve. More selling of June 108 calls on 10s appeared to be a liquidation trade given the declines in open interest. Dealers suggest that a shop was involved with selling up to 25,000 June 108 calls over the past week, possibly to mortgage players hedging prepayment risk through options rather than outright.