The bond dipped a half point, but bounced back in choppy pre-payrolls trade. Much of the flow was at the front-end of the curve, which outperformed led by solid demand in the lead month euro$ future. Leveraged accounts scooped up over 34,000 in the March 2004 contract, which may have been offset against weaker deferred contracts or Treasuries as a curve or spread bet.
Option activity was said to be keeping a lid on the long-end, with one bank selling 6,000 109 calls on December bonds on behalf of a mortgage client. An Asian account was rumored buying FoBs (5-year notes for bonds) as well. The December bond closed down 3/32 at 112-02, while the 2-year note and 30-year bond spread widened 2 basis points to +344 basis points.
Swap and agency spreads also pushed out a couple bp, driven by the front-end. Fedspeak from Broaddus was mostly bullish on the economy, while Gramlich pushed for a "non-binding" inflation target