Wells Fargo strategists suggest......>

US TSY OPTIONS: Wells Fargo strategists suggest much of the curve flattening

tied to the Federal Reserve's balance sheet reduction has already occurred they

still like flatteners in 2s10s (-1.51bp Fri to 51.91bp). "In our view, the

December 2018 forward of 47bps is an easy target to beat." In the long end,

Wells Fargo prefers steepeners with 10s/30s around "38bps spot, while the

December 2018 forward is 30bps. The key for the long end is whether (and how)

the issuance profile of Treasuries changes, potentially boosting the percentage

of 30yr debt or possibly adding 20yr bonds to the mix." In the intermediates,

the "Fed's balance sheet reductions per se should have little additional effect

on Treasury 5s/10s," Wells added.