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22:05 ET Japan August M2 rose +0.3% m/m SA to +2.8% y/y from +2.7% y/y in July, off from 7-year high of 3.4% y/y last Oct. Broad liquidity eased -0.1% m/m SA to +0.4% y/y from +0.8% y/y (revised from 1.3%). August Bank Credit (including Shinkin) slipped -0.3% m/m SA to -1.9% y/y from -1.8% y/y, back toward -2.0% y/y in May-June, lowest since 2005. These followed -1.0% y/y in December, the first y/y decline in 4 years. Decline in bank credit reflects weakness in demand, both due to a sluggish economic recovery, as well as a return to more normal credit conditions since mid-2009 that has allowed some borrowers to return to debt market, after having turned to banks to satisify financing needs when markets had frozen at the height of the financial crisis.

21:46 ET Japan August 20-day trade showed exports +19.1% y/y, imports +19.3% for -236 bln JPY deficit. It points to full-month August exports -3.5% m/m SA to +17.5% from +23.5% y/y in July. Together with imports +5% m/m SA to +23.5% from +15.7% y/y in July for -60 bln JPY trade deficit. This continues the erosion in exports SA from this year's high in January, slipping m/m SA for the sixth time in seven months, showing a loss of momentum after having recovered to their strongest level since Oct-08. The y/y growth still reflects the rebound from the lows reached during H1-09, following the collapse in global demand at the end of 2008, but the sputtering in recent months is being watched nervously by the markets. Separately, the July Current Account surplus rose to 1676 bln JPY NSA from 1047 bln JPY in June, +26.1% y/y, rising to the high end of the recent relatively narrow range. It included exports +24.6% y/y, imports +15.6% y/y, for 916 bln JPY trade surplus, consistent with earlier customs data.

21:44 ET Australia housing finance rose 1.7% in July, better than expected (median 1.0%) following a 3.2% drop in June. Finance remains well below the levels seen last year, falling 25.0% when compared to July of 2009 following a 28.3% y/y drop in June. The decline in June was the fastest rate of annual decline since the comparison turned negative in December of last year. Housing finance has reversed from the near term peak 31.5% y/y gain in September of 2009. Recall that the annual comparison turned positive in March of 2009 after a prolonged period of erosion. Overall, the downtrend in finance since mid-2009 is consistent with the impact of higher interest rates.

21:30 ET FX Action: EUR-USD has slipped to session lows of 1.2675, as reduced risk appetite weighs. USD-JPY, and EUR-JPY are fading as the Nikkei struggles despite better Japanese machine orders data, which has kept the pressure on EUR-USD. Sovereign EUR-USD bids are noted into 1.2625, though under there, the 1.25 handle comes into view.

21:20 ET FX Action: Comments from Japan's finance minister Noda, reported on Reuters, have not had the desired impact on the yen. The finmin said current FX moves have been one sided, and the MoF would take decisive action on the yen's rise, when needed. In addition, Noda said excessive and disorderly yen moves would hurt the Japanese economy. After these comments, USD-JPY has fallen to 83.60 lows, down from 83.80 a few minutes prior, despite the "verbal intervention". While USD-JPY remains above N.Y. lows, the lack of positive impact after official comments does not bode well for USD-JPY's upside potential.

20:43 ET Japan July core machinery orders bounced +8.8% m/m SA, beating median forecast for +2.0%. It left core machinery orders +15.9% y/y from -2.2% y/y in June, after +1.2% y/y in March was first y/y increase in 21 months, up from -39.5% in Jan-09, the steepest y/y drop in over 20 years. Together with July foreign orders +2.6% m/m SA to the highest level since Sep-08, and +50.2%, though narrowing from +74.7% y/y in June on a base effect, it translated into total machinery orders +5.7% m/m SA to +16.8 y/y from +24.2% y/y in June. While the data are volatile month-to-month, the July report offers some encouragement that the turnaround in capex is being sustained, both in Japan and globally, after total machinery orders to Japanese producers plunged to a record -49.4% y/y in Jan-09.

17:25 ET U.S. Consumer Credit Preview: Wednesday's release of July consumer credit is expected to decline -$3.0 bln (median -$5.0 bln). Consumer credit has still declined in 16 out of the last 17 months (with Jan-2010 the only exception), as the nominal level of outstanding consumer credit has ratcheted down as consumers continue to develerage extended balance sheets and banks try to rein in credit outstanding. We expect a continuation of that trend in July. For more, see the preview.

15:55 ET Asian Market Outlook: renewed concern about the EU stress tests pushed eurozone spreads wider overnight and weighed on stocks, and that could leave regional equities on cautious footing today. Attention shifts to the Bank of Canada policy announcement later today following steady policy decisions yesterday from the RBA and BoJ. Risk is tilted toward another 25 bps hike in the target overnight rate to 1.00%. As for today's data, Japan July core machinery orders, July current account, and August money and credit data are due, along with Australian housing finance. See our Outlook.

15:39 ET Canada Action: Details of next week's cash management bond repurchase operation (Sep 14) have been released by the BoC. A maximum C$1 bln will be repurchased, split among seven different bonds. See Call for Tenders.

15:35 ET N.Y. FX Summary (September 7) The USD index firmed in N.Y. trade on Tuesday, as risk appetite stayed soft on the back of fresh euro zone banking worries. There was no U.S. economic data to drive the market, so focus stayed on equities and commodity prices, both of which recorded losses through the session. The euro and sterling under performed versus the dollar, as EUR-USD fell to just under 1.2700, while cable posted nearly seven week lows under 1.5300. USD-JPY on the other hand, fell to fresh 15-year lows, as risk avoidance supported the yen. Elsewhere, the dollar bloc was soft, weighed down by the poor risk and commodity backdrop. See FX Trader page.

15:27 ET Canadian Market Summary: Canadas rebounded and the curve flattened in tandem with Treasuries, keying off renewed concern about European banks and pullback on Wall Street following last week's sharp rally. Solid demand for the Treasury 3-year note auction gave the market an additional boost. And the market anticipated a dovish statement from the BoC on Wednesday, even if the BoC decides to hike one more time to distance its policy rate from an emergency low setting. Against that backdrop an encouraging Manpower survey had little impact. Meanwhile, corporate supply featured a two-part deal from Bank of Montreal. USD-CAD rebounded to a four-day high at 1.0476. And the S&P/TSX Composite pulled back from the 3 1/2 month high made on Friday. See our summary.

15:17 ET Wednesday's Fed Beige Book is one of the week's highlights, especially given the light data calendar. This report will set the table for the September 21 FOMC meeting. But, the report is likely to largely mirror the data that's been released over the last six weeks, while the broad perspective of a moderating pace of expansion will be kept intact. In July the Beige Book said that "economic activity continued to increase" in most Districts, but that it had "slowed" in Atlanta and Chicago. That was the first time "slow" had been seen in the opening statement since the July 29, 2009 report. The Fed also indicated manufacturing had slowed. Interestingly, the Fed also said the labor market had "improved." We'll look to see if that assessment holds. The outlook on manufacturing could be mixed, but still expanding, while the housing market should still be sluggish, consistent with the characerizations seen in July. One significant take away from the employment report that could mute the market impact from the Beige Book is that it was not weak enough to necessitate additional quantitative easing (QE) from the FOMC as soon as the September meeting

15:13 ET Treasury Closing Summary: Trading resumed on Tuesday with stocks laboring under the pressure of European credit anxiety and bonds carving back some of their losses following Friday payrolls report. Though corporate and Treasury supply featured in good volume and will dominate the week, a return of risk aversion stole the show on the session with no data to consider and the 3-year note auction soaking up healthy demand. The NY Fed also bought $2.71 bln in intermediate Treasuries and the Fed's discount rate minutes revealed the expected KC and Dallas Fed votes for a quarter point hike. See our summary.

14:48 ET Treasury Action: Treasuries have extended gains this afternoon after a successful 3-year auction. Rate lock unwinds from a fairly hefty corporate calendar have also supported declines in yields, as has weakness in equities. Today's corporate issuance has included a $2 bln 2-parter from Societe Generale, including $1 bln in 3-year notes and $1 bln in 5s, along with a $1 bln from Home Depot. The yield on the 2-year note is down over 2 bps at 0.48%, while the 10-year yield is down over 9 bps at 2.61%, having recovered much of Friday's losses.

14:32 ET Canada Ivey PMI Preview: We expect the Ivey PMI, due out Wednesday, to rise 5.6% to 57.0 in August (median 55.5) following the 8.3% drop that left the index at 54.0 in July. The bounce in August would be consistent with the usual seasonal moves in this not seasonally adjusted index. Indeed, the index is is knocked lower every July, likely due to temporary vehicle assembly plant closures that are related to auto-retooling. The index typically rebounds in August. Hence, the anticipated August bounce will provide little in the way of insight into underlying domestic economic conditions. See the preview.

14:29 ET Canada Building Permits Preview: We expect permits, due out Wednesday, to fall 1.0% in July (median -4.5%) following the 6.5% gain in June. Permit volumes rose 2.0% to a 212.7k unit pace in June after slowing 3.0% to a 208.5k unit clip in May. That left permits running well above housing starts in May (195.3k) and June (189.3k). We expect starts, sales and prices to moderate in the second half of this year due to higher interest rates and the implementation of the HST in Ontario and B.C. The moderation in Canada's housing market should be orderly, with a more balanced market emerging in the second half of this year. See the preview.

14:16 ET Fed's Discount Rate meeting minutes showed 10 of the 12 District banks requesting no change in the primary credit rate of 0.75%, while KC and Dallas directors had voted for a 25 bp increase to 1% (minutes covered meetings from July 6 through August 9). Remember dissenting Fed President Hoenig presides over the KC District, while the hawkish Fisher rules the Dallas Fed. According to the minutes, the directors said economic conditions were "indicative of a slower pace of recovery," while they saw mixed results with respect to manufacturing and consumer spending. With respect to the two banks requesting an increase in the rate, those directors didn't feel the widening in the spread to the upper end of the Fed funds rate would represent any change in policy but would rather reflect a more toward normalization of the primary credit rate. The Fed Board was unanimous in its vote to keep the rate steady at 75 bps.

14:01 ET The RJ/CRB is up a half percent to clear 274 and marking the highest level in nearly a month after slicing up through its 200-day moving average at 270 last week, having dipped as low as 260 in late Aug on double-dip recession fears. Energy prices are mostly higher, split between a 0.9% gain on gas oil futures and a 2.5% drop on natgas. Ag products are mixed as well, ranging from a 4.0% gain on sugar and a 2% drop on cocoa. Industrial metal copper sank 0.9% as the dollar rebounded and stocks turned lower. Precious metals are split, with gold on the rise again 0.6% nearly to the $1260 area, while silver is trading lower. Livestock components are all over 1.0% lower. The USD index is up over 0.5% at 82.75 after the credit jitters in Europe offset fresh yen strength.

13:33 ET BoC Outlook: We expect a 25 bp hike in Wednesday's announcement alongside a dovish statement that sets the stage for an extended pause in rate hikes. GDP grew a disappointing 2.0% in Q2 but domestic demand expanded at a still upbeat 3.5% clip in Q2. Hence while GDP undershot the BoC's 3.0% Q2 forecast, ongoing momentum in domestic demand provides ample backing for another 25 bp rate hike. Of course, the economy has shifted to a more moderate growth trajectory (we expect 2.5% GDP in Q3), underlying inflation is non-threatening (July core CPI at +1.6% and the Q2 PCE chain price index falling -0.4%) and uncertainty over the U.S. remains elevated, arguing for an extended pause after the anticipated rate hike. See the BoC outlook.

13:06 ET Treasury Action: yields held relatively steady following solid 3-year auction results, which came in at respectable if not spectacular levels. The market seems to have warmed up to the new issue, which at 0.79% compares to the 0.76% yield on the current 3s that subsequently dipped to the 0.75% area.

13:03 ET Treasury's $33 bln 3-year auction was well received and was no big deal for the rallying bond market. The notes were awarded at a record low 0.79% rate, besting the prior low set last month at 0.844%. It was also little changed from the 0.786% at the bid deadline. Bids totaled $106 bln for a 3.21 cover ratio, which compares to 3.31 in August and a 3.09 average. The $1 bln cut in size was supportive. Indirect bidders took 42.4%, compared to 40% the prior two months. Direct bidders took 11.7%, down from 15.8% last month.

12:50 ET Euro$ interest rate options: a few deals went through as credit jitters resurfaced and stocks took a dive, though mostly in 2-way trade. The largest trade was a bearish 10k purchase of Jun 2011 88/91/93 "put butterflies" and a 5k purchase of Sep 2012 85/86 "put spreads". On the bullish side were a purchase of 4k in Dec 2012 85/86/87 "call trees" and a 2k purchase of Dec 2012 83/86 "call 1x2s". The Dec 2010 contract is 3.5-ticks lower, while the deferreds are now up to 10-ticks higher as the futures curve, like the coupon curve, flattens. See Accutic.net.

12:41 ET Treasury 3-year note auction preview: today's offering should be a non-event for the market and is expected to garner a decent bid even though the rally in Treasuries has stymied concession building. The wi note is trading at 0.78%, 4 bps richer on the session. And it's 6 bps more expensive than last week's high rate at 0.844%, which was a record low for this maturity. Nevertheless, sources say there's been decent demand from real money Japanese accounts fearful of the negative economic effects of the stronger yen. There's also been buying from some European accounts as sovereign debt issues rear their ugly heads again. The notes are also cheap on a 2s-3s-5s butterfly. The $1 bln cut in size should help the bid cover too. Last month's auction was awarded at 0.844%, with a 3.31 bid cover and a 40.5% indirect bid.

12:14 ET Canadian technicals: The December CGB established a short term floor just above the Jul 7 peak at 124.15 on Friday and the market is in recovery mode in contrast to stocks. We anticipate further near term gains to challenge the Sep 2 high at 125.56, possibly stretching higher to the Sep 1 high at 125.88 before running out of gas. However, failure in that range should expose risk for a second downturn targeting the 50% retracement of the Jun-Aug rally at 123.77 by mid-month before bottoming. See our CGB technicals.

12:11 ET FX Action: Technically driven selling kept USD-CAD from taking out buy-stops over 1.0470 earlier, and the pairing has eased back under 1.0420. Oil prices have reversed some of their losses, while equity market losses have been pared as well, both helping the CAD. Dealers expect activity to slow into the close, and overnight, as the market sets itself for Wednesday's BoC policy announcement.

12:03 ET U.S. corporate debt: Lithuania launched its $750 mln 7-year at a yield of +320 basis points over Treasuries. There is a stack of investment grade issuance getting set to price over the next couple sessions that should keep hedging activity elevated.

11:58 ET Treasury's $60 bln 3- and 6-month bill auction garnered solid support. The $30 bln in 3-month bills was awarded at 0.135% (0.125% at the bid deadline), 1 bp richer than last week's rate. Bids totaled $131 bln for a 4.42 cover ratio, down from 4.95 last week but in line with the 4.54 4-week average. Indirect bidders took 26.6%, down from 38.7% last week. The $30 bln in 6-month bills was awarded at 0.18%, also 1 bp richer than last week. Bids totaled $132.4 bln for a 4.45 cover ratio, up from 4.18 last week but closer to the 4.32 average. Indirect bidders took 35.8%, up from 21.7% previously.

11:31 ET Canada Action: Canadas have held onto earlier gains despite the encouraging Manpower employment survey seen this morning. Pullback on Wall Street and renewed widening in eurozone spreads have continued to cap yields as the market weighs the health of European banks, as well as strike activity in France and London. In addition, the market is anticipating a dovish statement from the BoC on Wednesday, even if the Bank decides to hike one more time to distance its policy rate from an emergency low setting. The 10-year yield has dropped 7 bps to 2.88%, extending pullback from the three-week high made on Friday at 3.01%. The 2s10s spread has narrowed 2 bps to +155 bps, but still finding a floor ahead of the May trough at +151.5 bps. Meanwhile, spreads versus Treasuries are mixed. The 2-year spread has pulled back 3 bps to +83 bps. But the 30-year spread has traded 3 bps less negative at -19.5 bps.

11:25 ET Treasury Option Action: volatility was bid up on 10-year futures with reports of a "fairly aggressive" buyer of Dec straddles, along with some demand for bearish combos against both 10s and bonds. Among the larger trades were a bearish sale of 2k in Oct 125/127.129 "call butterflies", a purchase of 1k in Dec 124.5 "straddles", a bullish sale of 1k in Sep 123.5 "puts" and 1k sale of Oct 123.5 "puts", and a bearish sale of 1k in Oct 126 "calls". For more detail, see Accutic.net.

11:20 ET Canada Action: C$500 mln was repurchased at the cash management bond repurchase operation, the maximum amount set out in advance by the BoC. All the repurchase was from one bond, the 2.75% December 2010. The next operation was scheduled for September 14.

11:19 ET European Fixed Income Summary: Bond futures have rallied today, though stocks have now moved off session lows. Bunds are outperforming on intra-eurozone safe haven flows, as spreads widened on new doubts over the stability of European banks after the Wall Street Journal suggested that Europe's bank stress tests may have understated holdings of risky government debt. Weaker than expected orders German July manufacturing orders, which unexpectedly dropped 2.2% m/m (median +0.5%), added to Bund outperformance. As of 15:09GMT the September 10-year Bund future is up 99 ticks at 133.15, while the December Gilt future is up 67 ticks at 124.51. In the cash market the 10-year Bund yield is down 8 bp at 2.25% and the Gilt yield is down 7 bp at 2.91%. By comparison, according to Reuters, the Italian 10-year yield is down 2 bp, the Spanish down 3 bp, the Greek up 9 bp, the Portuguese is up 15 bp and the Irish is up 20 bp. Meanwhile the DAX is down 0.69% and the FTSE 100 is down 0.53% on the day as of 15:00GMT. See our full summary.

11:14 ET FX Action: EUR-USD broke sell stops at 1.2730, and has so far based just over 1.2700. London names were the sellers of note from the 30 level, though N.Y. desks are seen on the bid into the figure.

11:07 ET NY Fed bought $2.708 bln in short dated notes in today's outright purchase, at the higher end of the recent range ($3.61 bln to $0.9 bln). Maturities ranged from August 15, 2014 through July 31, 2016, with concentration on the 2-5.8% of December 2014 ($720 mln). The Street showed the Desk $15.646 bln in collateral. See the Fed's details.

11:04 ET Treasury announced a $35 bln 4-week bill and a $25 bln CMB auction for Wednesday. The size of the 4-week bill was increased by $1 bln from the $34 bln amount that's prevailed since mid August. These bring total supply this week to $187 bln, including today's $60 bln 3- and 6-month bill sale, tomorrow's bills, and the $67 bln in coupons in the September mini refunding.

11:03 ET Euro$ interest rate futures are mixed in early action as the Dec 2010 contract is 2-ticks lower at 99.585, while the deferreds are as much as 8-ticks higher out the back. Opening stock declines, renewed stress over European banks and some resiliency on Treasuries have provided a prop overall for the short-dated rate contracts. The modest setback from Monday's electronic trade high at 99.625 appears corrective. Prices have been confined to the upper half of a near-term range trade between the Aug 24 peak at 99.645 high and the Aug 25 low at 99.50, but still seems to be slightly biased to the upside. Allow for a grinding advance to retest 99.645, possibly expanding the current trading range to the 99.700 psych barrier, before running out of gas. See Euro$ futures.

10:57 ET FX Action: USD-CAD buy stops are reported over 1.0470, just above the August 30 and September 2 lows. Poor risk appetite continues to weigh on the CAD, and a break over 70 could see the 1.0520 region targeted.

10:45 ET The ECB drained EUR 175.426 bln in a one day tender. The marginal rate was 0.80% and the weighted average alloted rate 0.77%. At the same time the ECB drained EUR 104.495 bln in a special 7 day deposit auction, where the marginal rate was 0.39% and the weighted average alloted rate 0.33%.

10:37 ET Treasury Action: bonds remain well bid with yields down several basis points across the curve despite impending supply. Although traders are going with today's more bullish flow in bonds on renewed concerns over eurozone banks, sources wonder why today? Banking concerns have been simmering on the back burner pretty much since the results were released back in late July. Questions over the tests' methodology were brought up then, but were mostly overlooked as the markets preferred to focus on the low 7 our of 91 failure rate. One reason why eurozone concerns are back in the spotlight today are the strikes in France and London today, protesting the austerity measures put in place (France is raising the retirement age from 60 to 62, and the parliament is starting debate on overhauling the entire pension system). Meanwhile, Irish and Portuguese spreads have blow out to record wides against German Bunds, at 380 bps and 355 bps, respectively. Both Ireland and Portugal are expected to cap the credit markets for funds this week. PIMCO noted ongoing concerns over Greece. Additionally, recent data have added to concerns over Europe's recovery in particular, and the global rebound in general.

10:05 ET U.S. Treasury Receipts Post Modest August Gains: Daily Treasury receipts suggest a 7% y/y August gain that leaves Q3 y/y growth slowing to an anemic 6% from 7.4% in Q2. Both increases are short of the double-digit gains typical for expansions. All of the August gain was in withheld receipts, though an August pop for this component from a lean July still leaves a sluggish Q3 path. Given an assumed 8% y/y August outlay gain, we expect a $115 bln August deficit that is consistent with a FY10 gap of $1,342 bln that matches the CBO forecast. See our report.

09:58 ET FX Action: EUR-USD has eased back from its earlier 1.2772 highs, now trading toward 1.2750, as the DJIA moves to session lows, and down 0.7% on the day. Dealers report relatively light trading conditions currently, though sellers are said to be waiting in the wings on a break of 1.2730.