Treasuries were trading in tandem...>

US TSYS SUMMARY: Treasuries were trading in tandem with the fluctuations of the

US stock markets until a near 2bp tail seen at the 7-yr Tsy auction saw

Treasuries sell-off across the curve but mainly in short to medium part of the

curve.

- At the close 10-yr note yield was -0.5bp at 2.7698% while yield curve is

flatter with 2s/10s -2bp at 48.76bps and 10s/30s -1.6bp[ at 23.54bps.

- Earlier Tsy rallied during European morning session supported by move higher

in Gilts and Bunds. Tsys started to par gains however, as US traders got to

their desks which also coincided with a recovery in US stock futures. 

- A larger than expected upward revision to US Q4 GDP temporarily weighed, but

sharp sell-off in Nasdaq stock futures led to sharp recovery in Treasuries.

Equities were beginning to stabilize and Tsys gradually pared gains in lead up

to 7-yr Auction for $29bln. Tsys, especially the short/medium-end then extended

their sell-off as 7-yr auction came in at 2.72% vs wti level of 2.704%.

- Newswire headline that N.Korea seeks summit with Japan also weighed on Tsys.

- Swap spreads are mixed with 5-yr 0.5bp tighter but 2s, 10s & 30s touch wider