*** Flattener tone evaporated.......>

US TSYS SUMMARY: *** Flattener tone evaporated late as US$ index (DXY) rebounded

+.246, 90.637, choppy long end support disappeared. Gold reversed (XAU -10.32,

1328.10); while equities made new all-time highs: Indu +329 and change to 26122,

emini +23.25, 2805.75; West Texas crude rebounded (WTI +0.18, 63.91) more on

back of cold weather affecting Texas crude ports.

- Tsy curves rebounded, earlier curve Block 10s30s ultras Blocked: +5,455 UXH,

131-31, buy through -29 offer at time of post vs. -2,539 WNH, 164-31. 10Y yld

+.0203 at 2.5573, 2Y yld +.0207, 2.0349% last seen mid-Sep' 2008.

- Ongoing high-grade corp supply -- largest issuance from banks ($3B Citi, $2.5B

Westbank, waiting on DB) generated hedging flow. Supply weighing on front end

spds. Little react to data, US Gov shutdown midnight Fri, Fed blackout Saturday 

- Decent option volume, some profit taking in puts, decent low delta adds

targeting Jun rate hikes, position roll-downs and upside call buying in the mix.

- Heavy front end selling Eurodollar futures as rate hike probability for March

and June on the rise (97% and 68% respectively).

- Late ylds: 2Y 2.039%, 3Y 2.157%, 5Y 2.391%, 7Y 2.511%, 10Y 2.572%, 30Y 2.845%