Option expiration was expected to be a non-event given the current price levels. However, another dollar/yen surge, to 109.34, underscored by a terror threat in Japan, pressed Treasuries lower. The higher buck means the Bank of Japan is now less likely to want to intervene in the foreign-exchange market to support the dollar and use the proceeds to buy Treasuries.
Fed Chairman Greenspan says the labor market is improving and employment will pick up before too long. He said there's "palpable unease" that U.S. jobs and business are draining away, but says the U.S. is best served by "full and vigorous engagement in the global economy."