The curve initially flattened ahead of tomorrow's 2-year auction, but soon steepened on the news of two postal worker deaths in Washington D.C. were confirmed as Anthrax-related, a New Jersey worker was infected, as was a remote White House postal machine.
The 2s/30s spread jostled between +259-264bp, while the December bond made a fitful recovery to -6/32 and 106-7/32 from knee-jerk lows of 105-24 set in reaction to the late Monday rally on Wall Street. The Fed's Greenspan embraced systemic flexibility, but remained mum on policy.
Housing agency Fannie Mae priced $6 bln in mostly 5-year notes, while Ford's $9.4 billion jumbo deal traded lower in secondary markets and the belly accordingly suffered indigestion. Sizable roll/spread selling of December 110 calls for March 112 calls on 10s was noted.