Wells Fargo head of rate...........>

US TSYS/RESEARCH: Wells Fargo head of rate research Mike Schumacher and

strategists Boris Rjavinski and Zachary Griffiths said that Tsys "volatility

remains low but should pick up soon. Fed balance sheet reduction, ECB tapering,

the U.S. debt ceiling and government budget battles, and geopolitical risks all

loom as potential triggers of higher vol."

- Thus they "recommend using options to protect against higher realized vol in

intermediate rates and higher implied vol in short tenors."

- They also "remain neutral on core SSA names and recommend monetizing gains by

switching into less-fully valued issues. Supply has fallen significantly in

2017, helping restrain spreads on core SSAs. Predictably, investors seem

reluctant to grow their SSA holdings as spreads hit 2017 lows."