Similar to Tue's price action after....>

US TSY FLOWS: Similar to Tue's price action after strong 5Y auction, Tsys gained

as 7Y trades through (awarded 1.835% rate vs. 1.842% WI; 2.47 bid/cover vs. 2.44

prior) but prop/fast$ sales saw lvls retraced appr a third of the move. Previous

$32B 7Y awarded 1.719%; 2.47 bid/cover vs. 2.44 prior. Indirects drew 59.42% vs.

69.63% prior, directs 23.43% vs. 10.05%, dealers 17.15% vs. 20.31%.

- Delayed reaction on thin volume, Tsy futures extended session highs a few

minutes after the auction on only an additional 10k in TYH for example. Yld

curves bent flatter on narrow range while volume trade remained extremely light

w/TYH<325k by the bell.

- Eurodollar futures traded marginally higher on exceptionally thin holiday

volumes. No USD LIBOR sets or European sets for that matter due to Boxing Day

holiday, LIBOR fixes resume Friday.  Swap spds narrowed amid better rate

receivers in 2s and 5s on net, 10Y spd held narrow range w/mild payers in 9s

(1.8275%) and 10s (1.8615%) in the second half. No deal-tied hedging.

- The 2-Yr yield is up 1bps at 1.631%, 5-Yr is up 1.3bps at 1.7222%, 10-Yr is up

0.2bps at 1.9014%, and 30-Yr is up 0.4bps at 2.3327%