Early downside leads came from the bunds and euro after heavy real money and Japanese stop-loss selling was rumored on both counts, dragging Treasuries lower in their slip-stream. Also causing indigestion in the belly were unsubstantiated rumors that the Treasury might bump up its five-year auction cycle to monthly from quarterly as it seeks to front-load borrowing. The Mar bond finally cracked its range low of 101-31 and extended declines to 101-13, before finishing just 4/32 in the red at 102-03.
Stocks put in an uninspiring performance and the floodgates of corporate issuance remained wide open. Fed funds futures eased to price 8% odds of an interest-rate cut on Wednesday.