A plethora of news underscored more volatility. Prices opened firmer after a video revealed Al Qaeda was responsible for Madrid's bombings. Early short sales were sent scrambling to cover after weak Empire State data.
But prices reversed on FNMA's steady duration Gap news, quelling hopes for convexity hedging, then moved lower following a jump in industrial production and capacity data. Prices then turned positive as stocks continued to swoon on the Spanish election results and heightened terror fears.
Ironically, after the TICS report showed record foreign holdings of U.S. debt earlier, Japanese press said Bank of Japan intervention may end by the month's end. But the Bank's intervention after the press release trimmed Treasury losses.
Despite selling picking up again into the close, Treasuries finished mixed ahead of tomorrow's FOMC meeting. The Fed is expected to leave rates and the policy statement unchanged, but traders will be closely watching the wording of the statement.
CNBC reported that Treasury Secretary Snow will meet with the presidents of the 12 Federal Reserve Banks tonight in Washington before the meeting. Snow reportedly will discuss efforts to swing China toward a more flexible foreign-exchange regime, the most recent G7 meeting, tax cuts, economy, and job losses.