Risk-on tone carried over from the.....>

US TSY FLOWS: Risk-on tone carried over from the week opener, rates weaker all

session as equities hit new all-time highs (ESZ9 3085.75) early in the session.

But the correlation broke down by midmorning -- Tsys remained weaker even as

equities reversed gains as focus on US/China trade (or fears of collapse)

outweighed better than expected ISM PMI data. 

- Yld curves bear steepened w/3M10Y making new nine month highs. Note, given

consistent selling since NFP, the chances of a forth rate cut by year end has

fallen from mid 30% last Fri to 9% currently.

- On flow, corporate issuance and pre-auction short sets contributed to pressure

in 2s-10s, real$ and bank portfolio selling in long end. Early 2s5s steepener

block: +6,383 TUZ 107-19.12 buy through 107-19 post time offer; -5,122 FVZ

118-19 post-time bid.

- Decent US Tsy $38B 3Y Note auction (912828YR5) awarded 1.630% (1.413%

previous) vs. 1.631% WI, bid/cover 2.60 vs. 2.43 previous.

- The 2-Yr yield is up 4.2bps at 1.6245%, 5-Yr is up 6.8bps at 1.6607%, 10-Yr is

up 7.6bps at 1.8531%, and 30-Yr is up 7.2bps at 2.3347%.