Outright flows were relatively light, though the bond was down over a point at one stage and 10-year yields nearly broke 4.45% before settling lower. Over the past couple sessions there were rumors of large liquidation in euro$ futures, including 27,000 June 2004s and 10,000 March 2004, as Fed tightening expectations were brought forward.
The curve flattened as a result of the front-end underperformance, with the 2-year note and 30-year bond spread bowing 4 basis points to +352 basis points. The December bond closed down 17/32 at 106-11. At one point, rumors of hedge fund "troubles" appeared to get the attention of stocks, but the talk had little traction with bearish Treasuries.