Risk appetite returned early...........>

US TSY FLOWS: Risk appetite returned early overnight on headlines that US and

China officials agreed to a tariff rollback IF a mutually agreeable deal can be

reached. That drove the tone for nearly the whole session. Until late headlines

aired that any tariff roll-back was causing internal strife in WH. More: WH

Kudlow said there would be concessions if there's a phase 1 deal, while Chinese

officials said there would be NO roll-back in exchange for phase 1.

- Tsys ground lower through midday, flow included real$ and bank portfolio

selling 10s and 30s, two-way option tied flow, prop and fast$ selling

intermediates, 2s and 5s vs 10s steepener as the climb in yld triggered unwinds.

No corp-deal tied hedging. Stops triggered in belly around midday. Fast$ and

prop accts bought 5s-10s late.

- Weak US Tsy $19B 30Y bond auction (912810SK5) awarded 2.430% (2.170% last

month) vs. 2.422% WI; w/ 2.23 bid/cover (2.25 prior). Indirects drew 58.79% vs.

58.52% prior, 20.48% directs vs. 18.54%, and 20.73% for dealers vs. 22.94%

prior. The 2-Yr yield is up 6.1bps at 1.6693%, 5-Yr is up 9.9bps at 1.7302%,

10-Yr is up 8.6bps at 1.9138%, and 30-Yr is up 7.7bps at 2.3929%.