"Buying by small retail accounts may be keeping the Street in a better position than people realize," one government bond trader said.

The agency started with local retail accounts and expanded to more regional work.

Dealers involved in the transaction said demand for the new issue was good from both retail and institutional accounts.

"The recovery is looking a bit more certain than it did as recently as two weeks ago, and retail accounts are just not buying much."

Right now, most retail accounts that normally are in the market have moved to the sidelines.

They had strong early sales, with 40% of retail accounts placing reorders.

"We haven't taken prices down to the point where retail accounts are saying they want to own securities," one government bond trader said.

"It appears the demand is coming from small retail accounts," he said.

And when retail accounts go to the sidelines, things get difficult.

"We saw better buying from retail accounts all week long."