Some leveraged selling ahead of the data was interrupted and sentiment swung quickly to the bid side. With cash yields of numerous maturities breaking lower through key psych areas (2s sub-3.0%, 10s sub-4.90%, bonds sub-5.50%), mortgage-related convexity buying continued to play a bullish role. The September bond closed up 12/32 at 102-19 after stalling ahead of 103, while the 2s-30s spread widened 2 bp to +252 bp.
Outright flows were "average," though 3 foreign firms were good (+5,000) buyers of 10s after the data. Several shops transacted option hedges for mortgage players, with whole herds of calls and call spreads reported going through on 10s. One large Mid-West bank was heard rolling call strikes on Septemer 10s up the curve in "size" from 106s to 108s.