The Treasury market rallied in......>

US TSYS SUMMARY: The Treasury market rallied in the aftermath of the hiccups

being suffered by the tax overhaul plan but there has been a small fade of the

movement in Asian and early European trading. 

- The EURUSD cross currency basis swap has swung around violently in Europe as

dollar funding markets show signs of tension. The 3m swap is 10.7bp lower today

at -88.7bp and well below what was seen in December last year.

- One aspect of the move is to take a 2Y Treasury yield more expensive that 2Y

Germany when swapped into a common currency.

- Swap flow has seen some 3-5Y flatteners and a lot of paying in the 7 and 7Y

section of the yield curve.

- Relative to the US close, the 2Y UST is +0.8bp to 1.82%, the 10Y is +1bp at

2.36%

- Later today, the empire manufacturing survey for December and industrial

production data are the highlights on the data calendar although the elephant in

the room is the passage of the tax plan.