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COVID-19 pandemic angst continued to...>

US TSY FLOWS: COVID-19 pandemic angst continued to generate risk-off bid for
Tsys, Yld curves bull steepening, w/ 3M10Y MORE THAN 50% off inverted lows just
prior to the LIBOR set: implication, mkt pricing in more aggressive rate cuts
from Fed are cooling recession fears slightly. Chatter over emergency rate cut
from the Fed getting louder.
- Eurodlr Whites (EDH0-EDZ0) pricing in just over 3 25 bps cuts by yr end while
chances of 50bp cut increase: Mar 18 chances of 25bp cut fully priced while
chance of 50bp now 27%; Apr 29 fully pricing in a 25bps cut w/chances of a 50bps
cut at 75.5% vs. 34.5% on Thu. Third 25bp cut fully priced in for Sep 16 through
Dec 16 meetings with chances of 50bp cut in the final three meetings of 2020
running at 22.8% for Sep, 35.5% for Nov and 59.5% for Dec.
- Waves of early selling into strength from US prop and real$ accts, while some
chunky moth-end selling reported late. Other flow includes fast- and real$
buying intermediates, bank portfolio buying 30s, steepeners in 2s and 5s vs.
10s. Negative convexity crowd eying 1.650% 30YY as next trigger to buy,
currently 1.678%.

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