Familiar theme, rates recede late......>

US TSY FLOWS: Familiar theme, rates recede late after making strong headway off

lower levels in second half, 10YY new all-time low 1.2408% rebounding to

1.3004%, 30YY new low of 1.7408%, 1.7930% after the bell. Obviously mkts remain

headline sensitive, rates quick to react then settle in w/little follow through.

- Option accts continue to be better buyers upside calls hedging for as many as

three rate cuts by year end (Mar 18 chances of cut appr 64%, while Apr 29 fully

pricing in a 25bps cut w/chances of a 50bps cut on the rise (34.5%). A second

cut just now fully priced in for the Jun 10 meeting with a third cut around the

Nov to Dec meetings. Heavy call option buying underscores/anticipated the moves.

- Prior to late risk-off bid in rates by wide range of accts (Bbg headline:

"CALIFORNIA MONITORING 8400 PEOPLE" for virus rekindled bid), sources reported

real$ selling 2s and buying 10s, fast$ selling flys in the intermediates, real$

buying 7s and 10s, no deal-tied hedging but there were some auction hedge

unwinds/buying earlier. Prop acct selling strength in intermediates as levels

recede slightly off latest move. $32B 7Y Note auction tailed: awarded 1.247%

(1.570% last month) vs. 1.232% WI.