Fixed Income Recap:

HIGH YIELD UNCHANGED AFTER A NICE DAY YESTERDAY.  FIRMER BY ¼  TO ½ point. 

Fixed Income Most Recent Axes:

RCN Cable, Firstlight Power, Brand Energy, Coleto Creek, Swift Transportation, Celanese

IRM 8.375, , MAS 6.125, BZH, HEIGR 6.125 16, THC 8%, DHI 2011, LEN, VWRINT, HAWKER, MTH, OC, PZZ

Treasury Rates Commentary

• The volatile trading and price action continued for another day in Treasuries.
• The Treasury market opened up lower overnight led by the belly on mainly on better than expected manufacturing news out of China, German bund selling and large selling of 10y futures. A slightly weaker than expected ADP report down 10K in August versus an expected gain of 15K provided a small uptick early in the New York session but the market quickly erased these gains minutes later. The major selloff in the market occurred after the extremely strong ISM manufacturing data 56.3 versus an expected 52.7, prices paid 61.5 versus an expected 55.3 (one of the strongest economic data releases we have witnessed  in  quite some time) with Treasuries spiraling lower led by the long end (10y was lower by 1 1/2 pts intraday, 30y was lower by over 3pts intraday). After heavy volume and noise near the lows, the market settled down at these lower prices (slightly off last Friday's levels) finding a small uptick  throughout  the afternoon.  At 3PM Treasuries were lower price across the curve with benchmark yields 2.4-12.7bps higher. 
• The Fed conducted its sixth purchase today, once again smaller than we anticipated purchasing $900M out of $25.788Bln submitted.
• Tomorrow the Treasury will be announcing next weeks auction sizes. We are projecting $33Bln 3 year notes, $21Bln 10 year notes (re) and $13Bln 30 year bonds (re). The Treasury will also be auctioning $10Bln 10 year TIPS at 1PM, with the backup in rates TIPS outperformed with 10 year B/E out ~5bps.