### US 2-Yr yields are holding gains from...>

US TSYS: ### US 2-Yr yields are holding gains from last week even as long end

sees buying, at these levels 2-Yr yields are the highest since 2008 and are

starting to offer value. The spread over German Schatz at 240bp is the highest

since July 1999. "At these levels short end yields still offer value even when

considering the Fed hike that is expected in December" one trader told MNI and

added that they see the premium as building in the next hike which could be some

way off due to subdued inflation. A December hike is around 90% priced in

according to MNI PINCH. Inflation data on Wednesday will be key for markets and

has the potential to derail hike expectations and hit the short end. Fed's

Harker, a voter in 2017, says he has "lightly penciled in" a December hike, and

that low inflation provides reasons to be cautious. 

- The outperformance of short end yields has come alongside the longest

flattening streak on the curve in over 6 years, which has made the longest

securities relatively more expensive. In a report Nomura say investors could

take advantage of relative value in the short end and cut riskier, high-duration

UST's as a result.