Choppy day for rates -- Tsys surged....>

US TSY FLOWS: Choppy day for rates -- Tsys surged after much weaker than

expected private employ/ADP data (+27k). Equities enjoyed decent gains (ESM9

+22.0 in late trade); VIX weaker -.86 at 16.11. Tsy yld curves broadly steeper

while 3M10Y remains well inverted (-22.76).

- Mkts calmed down soon after ADP miss, while there was certainly heavy buying

(including Asia real$ in 10s), short covering/position squaring, stop outs on

way up, there was significant selling (including blocks) into the rally. Short

end well bid as mkt grows accustom to chance of 2-3 rate cuts by yr end.

- Trump Admin advisor Navarro said Mexico tariffs "may NOT go into effect" lent

to round of selling earlier. Late headlines incl Mexico will not accept "safe

third country status" contributed to round of risk-off trade. On tap for Thu:

May challenger layoff plans; weekly jobless claims; Apr trade balance; non-farm

productivity and unit labor costs; Q1 Service Revenue; May Treasury STRIPS and

Fed weekly securities holdings. The 2-Yr yield is down 4.5bps at 1.8389%, 5-Yr

is down 3.8bps at 1.8582%, 10-Yr is down 1.4bps at 2.1157%, and 30-Yr is up 2bps

at 2.6311%.