There was little in the way of market moving data to get the market rolling, although the 45% surge in refis supported early gains in Treasuries as did talk that the Bank of Japan could be putting intervention dollars to work and modest weakness in equities. More bullish call buying was also reported on the March bonds.
Stronger than expected 5-year auction results gave a knee-jerk boost to Treasuries. But to the frustration of many traders, the gains were not only sustained, but extended after newswires reported a new Bin Laden tape which exacerbated the September 11 safety trade in bonds and weighed heavily on stocks. The 5-year was awarded at 5.23%, well below the 5.26% expected, and the bid cover was the second best in a year at 2.47.
Treasury Secretary Snow's testimony on government-sponsored enterprises was not surprising as he advocated the creation of a new housing agency regulator under the aegis of the Treasury Department.