NEW YORK, Aug 1 (IFR) –

*The dollar strength is not abating and has been linked to some of the very chunky treasury and MBS overseas buying this morning (buying dollars and putting them to use in treasuries and MBS. The talk is that major Japanese banks are buying galore—across the curve with good lifts more recently in intermediate to long end cash and MBS–helped the break in 10-year cash below 2.00%.

*The flow-driven price appreciation is forcing in more algo buy programs, squeezing out shorts—more in the front end with the blocked 5k TUM at 107-08.75 deemed a buy (at 9.40 a.m. ET) with the recent 8.465k TYU at 127-27 linked to a large domestic money manager purchase (took place at 10.35: a.m. ET). CTAs are still buying in spurts.

*Real money accounts have been unwinding flatteners, but outright buyers in T-bill sout to 2-year notes, accompanied by hedge funds (again) leaving dealers in swift buy mode to replace that paper—its really a price chase this morning.

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