Headline/data flow ltd overnight, while.....>

US TSYS: Headline/data flow ltd overnight, while broader Asia-Pac liquidity was

hindered by a Singaporean holiday. A pullback in e-minis coincided with wider

risk aversion, as focus fell on talk of Chinese state funds shedding large cap

exposure in mainland equities. T-Notes have held a 0-05+ range and last trade

-0-01+ at 139-14+, after moving off lows on the aforementioned dynamic. Curve

flattening has built, with yields unch.-2.2bp richer across the curve. Analysts

are becoming increasingly wary re: the potential for convexity hedging flows if

the lower end of the recent 10-Year yield range is broken (~0.54%).

- A reminder that Thursday saw a particularly strong round of 30-Year supply

(further facilitating bull flattening on the day), which stopped through WI by

over 2.5bp, with the cover ratio ticking higher and dealer participation moving

further below recent averages. Indirect takedown was the highest on record for

30s, likely aided by decent FX-hedged yield pickups for both German and Japanese

investors, when compared to the local equivalents.

- Eurodollar futures last seen unch. to -1.0 tick through the reds.

- PPI data headlines a slim local docket on Friday.