Retail flow was mixed. Speculation that the Fed would sit tight on interest rates also underscored a bid, cancelling out the pullback on yet another Bin Laden capture rumor. By noon a strong bid emerged, with long-end buying linked to rate-lock unwinding ahead of the $500 million 30-year Procter & Gamble pricing. Further dollar weakness also resurrected foreign-exchange intervention speculation, a move that would likely spur U.S. Treasury buying overseas.
The break below 4% again in 10-year notes forced in buyers, and front-end Eurodollar buying picked up following the slide in technology stocks. Retail booked profits at the highs, but the bid persisted into the close.