Washington Post Fedwatcher John Berry fanned those assumptions by reviewing criticism that the Fed had "mystifyied" the markets. Bond fund PIMCO managing director Paul McCulley said he expected some "drive-by transparency" from the Fed chairman as well. A record 0.15 duration extension on the Lehman bond index Friday in the wake of the huge quarterly refunding also encouraged some front-running of month-end demand.
Late in the session, news that the greater part of central London was blacked out by a transformer outage put some juice in the late bid, though terrorism was ruled out. The September bond closed 1-10/32 higher at 107-20 after bouncing ahead of 106-00 support, while the 2-year note and 30-year bond spread steepened back out 5 basis points to +330 basis points after flattening to +325 basis points on the 2-year When Issued roll. Stocks kicked higher into the close, while the dollar was collared in a tight range.