Treasury prices rallied yesterday on the news of a surprisingly large decline in April housing starts, and the short end outpaced the rest of the market because the weak housing report nourished traders' hopes for a near-term easing by the Federal Reserve.

Late yesterday, short-term notes were up 1/4 to 1/2 point, and the 30-year bond was 5/8 higher to yield 7.76%. This was the lowest closing yield on the long bond since early February.

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