Following on from a largely risk-on....>

BOND SUMMARY: Following on from a largely risk-on Asian equity session, Europe

has seen a much more pessimistic start to the day with yields on USTs, gilts and

Bunds at the lows of the day.

- UST yields were fairly range-bound in the Asian session following the

postponement of the State of the Union address until the government shutdown has

ended. However, poor European data has pushed yields lower with 2y yields down

around 0.8bp and 10y yields down around 0.7bp.

- Bunds are at their strongest level since Jan 17 with the 10y yield falling

around 1.5bp to 0.21%, helped lower by disappointing French services and

manufacturing PMIs and the German manufacturing PMI falling below 50 for the

first time since Nov 2014. The curve has bull flattened with Schatz down around

0.3bp on the day.

- EGBs are bucking the risk-off FI market tone somewhat with peripheral spreads

slightly tighter on the day.

- Gilts have also begun the morning on the front foot, with the curve also bull

flattening. 2y yields are down 0.4bp while 10y yields are down 1.3bp.