A spurious rumor that Bin Laden had been found extended the early gain in stocks, which in turn pressured bonds further. But, there was no follow-through to the moves and the respective markets soon began to reverse. Unwinding of various rate locks also helped Treasuries sustain their bullish turnaround (GECC priced a $6 bln 2-yr FRN).
Short covering further added to the upswing in bonds as the 30-yr rallied through its recent range top at 97-10 (5.562%). The Treasury auctioned $39 bln in bills without a hitch, reflecting the ongoing demand for liquidity. The Senate passed a $450 bln increase in the debt limit without debate, but it is expected to have a much harder time getting through the House.