5 year treasuries set a new record low, yielding 1.122%.  The old low was set in December 2008 at 1.18%.  10 year notes traded as low as 2.36% before giving up some ground to finish at 2.39%.  Real money accounts stepped up to buy, especially once the ADP report showed continuing pain in the employment sector.  Rumor also had it that a West Coast Hedge Fund (Pimco?) was in the market buying 2 billion 10 year notes as their position was believed to be underweight that duration.

Mortgage backs performed like dogs, widening out to treasuries while closing up 10/32’s on the day.  We see traders and money managers taking a neutral bias, waiting for pullbacks (consolidation) in the market to buy.

Keep in mind that tomorrow will be “square up day” where trading is typically quiet before a big release like Friday’s Employment Report.  More on that tomorrow.