US Tsys are trading little..........>

US TSYS SUMMARY: US Tsys are trading little changed at start of US session

having seen some 2-way flow during the European trade as they made time during

Asia.

- Fed Governor Quarles spoke in Asia but said little more insightful than the

economy is 'performing well'. There were no monpol comments.

- As European markets opened, equities began to fade and a bid appeared, first

for the Schatz as Spanish CPI disappointed and then the Bund as it broke through

technical levels. The TY future followed the European complex higher.

- The Bund-Treasury spread hit 232.5bp on the Bund rally earlier, the widest

spread since 1989. However, when accounting for the cross currency basis swap,

the pickup is a much narrower 17.7bp. With the Japanese FY end approaching,

there may be an acceleration of a switch to EGBs. There was a seller of at least

8k TYM8 at 0940BST, which had a material impact upon price.

- Later on, Treasury sells $35bln 5Y notes and 4wk and 52wk bills. Economic data

includes consumer confidence and Richmond Fed mfg. Bostic talks at 1100EST

- Swaps, spds tighter and Eurodollar futures ticking higher in modest volume