Markets were caught off guard when.....>

BOND SUMMARY: Markets were caught off guard when NY Fed issued a surprise

clarification of an earlier speech from its President Williams, who outlined the

merits of quick policy response to economic difficulties. Alongside with dovish

remarks from Clarida et al, it send Tsys rallying yesterday. T-Notes dived

before paring some of the losses and consolidating around present levels. They

last trade -0-01 at 127-19+, away from the session low of 127-14+. Cash Tsy

yield curve has bear flattened; Eurodollars are 1.50-2.75 ticks lower thru the

reds. No reaction to the planned phone call between U.S. & Chinese trade reps.

- JGB futures advanced despite a rally in the Nikkei 225, last trade 7 ticks

above settlement at 153.62. Little reaction noted to today's 3-Month Bill supply

and 1-5 Year JGB liquidity enhancement auction, or the release of CPI figures,

which matched forecasts. Japanese-S. Korean trade spat continued to escalate.

- Australian YM is 0.5 tick lower, with XM 0.5 tick higher, both range-bound in

the absence of local headlines & data prints. Aussie bond yield curve has twist

flattened a touch. Bills last seen unch. to 1 tick better off.

- Bunds +0.26, Bobls +0.13, Schatz +0.035.