Rates bid, but off midday session......>

US TSY FLOWS: Rates bid, but off midday session highs, weak ISM mfg PMI (47.8)

helped trigger rally off lower open, while apparently spurious Brexit backstop

headlines spurred bout of risk-off unwinds in second half despite EU officials

denying reports. Yld curves bull steepened.

- Tsys opened weaker just off early London lows on heavier volumes on back of

weakest Japanese 10Y auction in three years, Chicago Fed Pres Evans in Germany

not supportive of third rate cut weighing on front end.

- Rates surged on ISM mfg miss, held gains until headlines EU considering

"time-limiting" backstop mechanism for the Irish border. GBP spiked then

reversed move as EU officials denied discussion.

- Heavier volumes belied rather thin choppy markets amid two-way month/quarterly

repositioning, bout of selling last few minutes followed by fresh round of

buying in 10s and 30s from prop and real$ accts. Nice wide range ahead Wed's ADP

private payrolls ahead Fri NFP.

- The 2-Yr yield is down 6.6bps at 1.5559%, 5-Yr is down 4.2bps at 1.5016%,

10-Yr is down 1.7bps at 1.6473%, and 30-Yr is unchanged at 2.1105%.