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Rates holding weaker levels after...>

US TSYS SUMMARY
US TSYS SUMMARY: Rates holding weaker levels after midday, off first half lows
amid modest consolidation/position squaring after curve steepening sell-off on
stronger than exp Jul NFP (+209k). Dec rate hike prob. 37.6% (MNI PICH).
- Tsy futures traded mildly weaker into the open; rates opened mildly higher
O/N, adding to Thu's long-end lead rally, reversing course into London trade,
following Bunds after upbeat German factory orders.
- Cash Tsys saw two-way flows by real$ and hedge funds amid initial selloff,
brief foreign central bank buying in short end followed by cross-current flow in
5s and 10s.
- Accelerated selling from prop, real$ and program accts in 5s, 10s and 30s,
FX-tied selling amid rebound in USD vs. majors, dollar weakness "way overdone"
one desk adds. Tsys saw initial 5/30Y curve flatteners then some profit-taking
and more unwinds. Cash Tsy 2/10Y, 2/30Y, 2/5Y curves saw recent steepeners.
Deal-tied hedging absent going into the weekend.
- Heavy limited upside call fly buying, EDZ 96/97/98 call fly betting on no more
rate hikes for '17 as well as narrowing of FRA/OIS from mid-teens.

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