ASIA JGBs - The benchmark 10-year note was down 55 ticks to 136.79 by around 0630, after a report suggested that the Chinese government's investment arm is expected to invest some of its assets in Japanese stocks. The move came despite the fact that no sovereign wealth funds confirmed any asset allocation decisions. (RTRS) China Investment Corp. Sovereign Wealth Fund: 'Still working out investment strategy, has not yet decided to buy stocks' (RTRS)** GLOBAL FIXED INCOME SPREADS - US 2s/10s (0630): 91.04 (93.26 bps at 2100); US 10s/30s (0630): 38.53 (42.15 bps at 2100); EURO 2s/10s (0630): Unchanged (40.60 bps at 2100); EURO 10s/30s (0630) Unchanged (43.10 bps at 2100) US/GE 10s (0630): 0.51 bps (0.03 bps at 2100) UK/GE 10s (0630): Unchanged (52.40 bps at 2100) U.S. Sales rise 8.3% from a year ago on Black Friday, more than most forecats (RTRS)** Most forecasts were looking for a year-over-year gain of around 4.0%. Subprime mortgage crisis poised to get much worse as interest rates are set to reset on $362 billion worth of ARMs (WSJ) The paper cited analysts at Bank of America. In related news, the FT said the credit crisis may cause more losses and a recession. Fed sensitive to impact of rate cuts on dollar (FT) Analysts expect Bernanke and Kohn to assure the markets of this fact this week. Fed's Discount Window borrowing falls USD 89.0 billion in week ended November 21, Fed says (BBG) EUROPE ECB to pump emergency cash into money markets this week (Weekend FT)** ECB will inject an unspecified amount of extra liquidity in its money market operations noting âre-emerging tensionsâ and would do so until the end of the year. The move, announced on Friday, will see an amount allotted that is above the ECB benchmark. In related news, today's WSJ says that the well is drying up for banks as funding pressures persist in the interbank market and the market for covered bonds has dried up. ECB's Quaden: 'ECB's key scenario of a mild economic slowdown and rising inflation renaubs; uncertainties have risen' (Le Soir & De Morgen)** ECB's Stark: 'ECB is not satisfied with inflation trend in Eurozone, even if upward pressures on prices are expected to ease next year (RTRS)** SNB's Hildebrand: 'risk of inflation has increased, can't react to financial crisis by cutting interest rates' (Sonntagszeitung)** FOREIGN EXCHANGE ECB's Bini Smaghi: 'EUR/USD rate does not reflect fundamentals, with U.S. economy stronger than it appears in that rate (RTRS)** China FX reserve funds to invest in Japanese Equities (MNI)** The report, which has still yet to be confirmed by any sovereign wealth funds, caused significant strength in the JPY overnight. GEOPOLITICAL/GLOBAL EVENTS Adoption of tougher Iran sanctions could cost German budget EUR 2.0 billion (Der Spiegel) COMMODITIES Crude rises to a near record high overnight on colder U.S. weather and a persistently weak dollar (RTRS) WTI for January delivery was trading at $98.23/barrel at around 0630, up $0.05. OPEC to discuss increasing output at December 5 Abu Dhabi meeting, Iran's oil minister says (RTRS)** In related news, the oil minister said that Iran is capable of producing more oil to meet demand, but must be committed to OPEC's decision on output change.