Outright flows were anemic, though mortgage-related and structured option trading was reasonably active. The belly of the curve was initially heavy after sales of five-year notes by a German bank, with wings outperforming in line with some butterfly option strategies deployed.
A Midwest bank continued to sell September calls on 10-year notes against calls on the December contract, likely for its mortgage client.
The September bond bounced from 102-08 congestive support and closed up 5/32 near session highs of 102-31. The two-year note and 30-year bond spread narrowed five basis points to +265 basis points, but this was mostly a function of the roll down to the new two-year note auctioned on Friday and effectively the curve actually finished steeper on the day after the new two-year note outperformed.