Choppy, T-Notes +0-26+ at 138-02+, back.....>

US TSYS: Choppy, T-Notes +0-26+ at 138-02+, back from early highs. Middle East

tension & a G7 phone call getting some interest (although nothing of note in the

latter). Early bid more than reversed on Thurs, even as U.S. equities suffered

their most pronounced losses since '87, as Tsy market liquidity/plumbing

questions grew, while the ECB disappointed markets at its latest MonPol

decision. The liquidity matters saw the Fed announce a whopping $1.5tn worth of

fresh term repo ops. Thursday's 3-month op was very undersubscribed, Fed

accepted all of the $78.4bn bids tendered (potential size was $500bn), although

short announcement to deadline timeframe may have ltd participation.

- Elsewhere, Fed announced that it will conduct purchases across the curve as

part of $60bn reserve management between Mar 13 & Apr 13. Across TIPS, FRNS,

nominal coupons, bills, among 11 sectors. The Fed noted that the purchases will

"roughly match the maturity composition of Treasury securities outstanding."

- Notable twist steepening seen Thursday. Sharp pull back was seen in the wake

of another soft auction, this time of the 30-Year variety, which saw a 4.0bp

tail. Move aided by a block sale in TY futures, before bounce into the close.