The escalation of trade tensions.......>

BOND SUMMARY: The escalation of trade tensions between the US and China has

sparked a flight to safety, with USTs, Bunds, Gilts and JGBs benefiting.

- With the US' late Tuesday announcement of additional planned tariffs on

$200bln in Chinese imports, and China vowing retaliation, 10-yr UST yields

dropped 4bps by early Wednesday, though have since retraced 1.5bps, now 2.840%.

- The US 2s10s spread briefly hit a new cycle low at 26.73bps, down from

30.08bps 24 hours earlier, but has edged up to 27.88bps as 10s have retraced.

- 10-yr Bund yields are down 1.5bps at 0.303% and JGBs 0.2bps at 0.680%.

- Gilts also bid, Sep8 future up 14 ticks at 123.06.

- Periphery EGB spreads are slightly wider but relatively small moves overall.

Supply in focus with auctions in Portugal (coming up shortly) and Italy (Thurs).

- Eurodollars the big movers among rate futures strips, with Red through Blue

contracts up 3.5-4.0 ticks. Short-dated Euribor flat, while Short Sterling up

1.0-2.0 ticks across the strip.

- Limited data today (US PPI the highlight), with the NATO summit, Brexit news,

ECB speakers, and Bank of Canada decision eyed.