US Tsys received a strong bid in.......>

US TSY/RECAP: US Tsys received a strong bid in late NY trading thanks to a

rotation out of stocks and into bonds, with the 10-year future surging to erase

the losses seen over the past week. T-note futures last trade at 118-08+. 

- The 10-year yield dropped all the way back to 3.1629%, breaking back below

3.2% in sympathy with lower stocks, causing the 2s-10s curve to flatten on the

day. 

-  The correlation across stocks and bonds has risen close to 1 in the near-term

as the risk-off theme dominates. Oil price weakness also added to the downward

pressure on yields. 

- Despite the collapse in stocks, breakevens managed to fall just 2bps on the

day to 2.1535, causing real yields to decline, weighing on the dollar.

- The potential for further equity losses to drag down breakevens and support

real yields and the dollar, as has been seen during previous market crashes. For

now though, real yields are heading lower, with the 10-year trading at 1.0078%.