Record gains in home sales caused some to fade their aggressive Fed easing expectations. The weight of supply also depressed the short end. Set up ahead of the Treasury's $10 billion two-year sale boosted the yield. A ton of two-year and three-year corporate and agency paper also left that sector heavy. These factors out-muscled the bullish impact of the Fed's $1.28 billion coupon pass.
Meanwhile, the bond benefited from the curve trade, as well as a larger than expected bond buy back announcement. Though the bond hovered in positive territory most of the day, a late surge in stocks knocked all treasuries under water.
In options, Tuesday's buyer of June 10-year 110 calls added to that position for a total of 60,000 over the last two days.