It was a volatile session in the absence of market moving data. Treasuries opened lower, following overnight profit-taking. Early retail flow was light and mixed. Prices ground lower, helped by option-related sales (dynamic convexity hedging). But by midmorning, the front end led a sharp rebound on large hedge-fund 2-year buying.

Multiple dealers were lifted, so the Street made the leap that foreign-exchange intervention was behind the pop. The rumor was denied, so prices ground back down. A narrow range ensued, with Greenspan the next focus. The Chairman said nothing market moving.

But by noon, prices again surged as the sharp stock declines sparked reallocation speculation. In addition, "Black-Box" players lifted chunks of 2-years. The rally extened on short covering, large 2-year purchases, and convexity buying.