Tsys reverse Mon's late decline,.......>

US TSY FLOWS: Tsys reverse Mon's late decline, Iranian Pres Rouhani would only

entertain talks w/DC if sanctions sanctions lifted; Beijing denied claims they

nor US called to discuss trade deal (out Mon but nobody wanted to hear it).

- Tsy futures surged early, continued into second half before running out of

momentum. Heavy volume tied to ongoing Sep/Dec rolling. 2Y10Y yld curve slipped

to new 12+ year inverted low. $40B 2Y note auction (91288YC8) awarded a 1.516%.

- Eurodollar futures bid across much of the strip after the bell, upper half of

session range, short end underperforming but well off early lows. Short end came

under pressure along w/short Sterling on headlines re: UK sees Brexit maneuver

room after Gr Merkel/Fr Macron talks. 

- Flow: pre-auction short sets in 2s, deal-tied selling in 3s-7s, fast- and

real$ two way in belly to long end, bank buying in long end vs. prop selling.

Yld curve steepener unwinds as curves bear flatten, 3M10Y off Mon's new 12.5y

low while 2Y10Y extended inversion, new 12.5Y low compares to -20.0 in Nov'06

and -56.0 in Apr'00. The 2-Yr yld down 1.7bps at 1.5223%, 5-Yr down 3bps at

1.3876%, 10-Yr down 5.1bps at 1.4845%, and 30-Yr down 7.2bps at 1.9634%.