The market opened weaker on the residue of the Barrons cover story which called for the FOMC to raise rates. Comments from an RBA official calling for a hawkish posture by that county's central bank also weighed on sentiment.

Sentiment shifted though with the release of a statement by the Federal Reserve Bank of New York which said that indeed the Federal Reserve is having discussions about reverse repos but all of the talks involved planning issues. The statement said that participants should not infer anything about monetary policy from the discussions.

That statement bolstered the markets fragile psyche as did the speech which Chairman Bernanke made at a Federal Reserve conclave in San Francisco. Some with whom I speak thought that he might make hawkish statements at that venue but the speech was pretty innocuous.

Separately, the National Homebuilders confidence survey slipped and recharged fears that the housing market will relapse into its slumber when the tax inducements to buying expire at the end of the month.

The yield on the 2 year note increased a basis point to 0.96 percent. The yield on the 3 year note climbed a basis point to 1.50 percent. The yield on the 5 year note declined a basis points to 2.34 percent. The yield on the 7 year note also slipped a basis point to 2.98 percent. The yield on the 10 year note dropped 2 basis points to 3.39 percent. The yield on the Long Bond dropped 3 basis points to 4.21 percent.

The 10 year/30 year spread flattened a basis point to 82 basis points.

The 2year/10 year spread flattened 3 basis points to 239 basis points.

The 2 year/5 year/30 year spread is 49 basis points.

The only noteworthy flow of which I  heard was Asian buying in the belly of the curve.

TIPS spreads continue to widen. In the 10 year sector the TIPS outperformed nominals by six basis points and are closing the day at 205 basis points.

In the 30 year sector the inflation protection bonds outperformed by 4 basis points and the spread is finishing the day at 225 basis points.