Dealers had been skeptical that the large issue, thin market conditions and ponderous data due tomorrow would result in anything other than disaster. But the bid-to-cover ratio was a solid 2.4, well up from 1.51 previously, and the when-issued notes were awarded at 3.3% yield compared to 3.35% ahead of the auction.
The ensuing short squeeze ignited a broad rally; cash two-year notes closed up 7/32 and 10-year notes and bonds closed up nearly a point. Two-year yields tumbled 17 basis points to 3.08%, while the bond yield dipped back below 5.48% from the 5.55% area.
Thursday's data releases was mostly anecdotal, but also proved supportive. MBA mortgage applications sank, the help wanted index set fresh 37-year lows, and the ABC consumer confidence index fell to 6-year lows.
Stocks flinched as the bin Laden tape threatened America's existence again, while the dollar held up fairly well after light profit-taking.