Treasury prices knee-jerked higher, led by the short end, as the recent combination of weak data, a sour Beige Book, and stock market declines significantly upped the odds of a 50 basis point easing this month. In fact, Fed funds futures priced in nearly 50-50 odds of a 50 basis point rate cut. Size call buying in Dec. euro$ was reported as well. But, technicals contained the upside (102-01 on June bond) and a recovery in stocks motivated profit taking into the weekend. The reversal in the bond extended the curve steepener (2s-30s) out to +170 basis points.
A late afternoon report that six Fed banks wanted a more modest 25-basis-point discount rate cut in mid-May also prompted traders to take cash off the table.