US/China trade angst continues to......>

US TSY FLOWS: US/China trade angst continues to heat up, strong risk-off bid all

session w/rates making new highs in second half; 10YY made new lows (1.7278%,

Nov'16 lvl); yld curves mostly steeper w/3M10Y the exception: after topping +2.0

last Thursday, 3M10Y yld curve extended new inverted low of -31.995 pre-open --

level not seen since April 2007. 

- Equities sharply lower, bounce late (ESU9 -94.0 to 2838.5, 2820.50 session

low); Gold up over +21.0 around 1462.0.

- Sep FOMC 25bp rate cut fully priced in last week while 50bp cut gains surges

>35% (CME model).

- Heavy volume w/better buying across the curve, real$, fast$ bank and insurance

portfolio in intermediates to long end, two-way in 10s-30s, heavy option related

hedging, pre-auction short sets ahead Tue's 3Y note auction. Talk, but no

confirm of negative convexity acct hedging on the move. Implied vol surged early

and remained strong through the close.

- The 2-Yr yield is down 12.3bps at 1.5893%, 5-Yr is down 11.9bps at 1.5391%,

10-Yr is down 10.9bps at 1.7362%, and 30-Yr is down 9bps at 2.2919%.