Morning Recap: US equity markets performed quite well on the heels of a strong retail sales indicator- but the front end of the US yield curve rallied on continued concerns about the roll-over of auction rate preferreds. In Tokyo, we resumed trading to the upside led by 10yr cash buying from Japanese RM accounts, but the mkt caved as Japanese GDP came in better than expected, sending JGBs tumbling. There was better shortening of duration in USTs out of 2s into the 1yr paper and generally the front end led the mkt lower. EGBs opened lower in line with USTs and continued to trade soggy on Eur supply. As Bunds got down to 116.00, reports came in of decent RM (domestic and Asian) buying of 10yr and 15yr paper, and talk of insurer buying further out. This was closely followed reports of broad based buying in US 10yr, especially by Japanese RM and Asian CBs as we approached 3.75% yld- some of it quite large. one US based RM account also bought a chunk of 5yr paper. These buy flows have taken us off the lows in EGBs and USTs, despite equities remaining in positive territory. The BTP auction was weak, but had little impact on futures prices. Gilt auction went ok, but a street event. As for curve plays, thereâs been some unwinding of 2/10s steepenersâ in EUR and US. As for credit, the iTraxx has had a tightening bias today with a mixture of early profit taking and shorts being reset. Looking ahead, US may fade the bid when they come in. As for data, Economistsâ look for initial claims to dip to a still-elevated 350,000 while the 4-wee kmoving average continues to move higher.There will be a lot of attention on BB today â desksâ expect Bernanke to admit that the downside risks to growth have risen substantially. Specifically, he seems likely to note the weakness in financial markets and the recent employment data. However, despite the FOMC's easing bias, they look for continued attn to be paid to the inflation outlook Free trial on Blooberg or UBS platform contact sales@brokertalk.co.uk