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Sell-off just before ISM non-mfg report suggests market was well positioned for stronger-than-expected headline figure and boost in prices index, which indicates inflation. Long-end Tsy futures sustain modestly negative prices, having hit session lows before the data. Shorter-term 2008-09 Eurodollar futures recently down as much as 2 BP. Fed-funds futures barely budge, with Nov contract still pricing in about 40% chance for FOMC to raise funds rate to 2.25%, from 2%, at Oct. 28-29 meeting. (HLP)

USD fluctuates in a tight range after the release of May non-manufacturing ISM report, but no major movement in the knee-jerk phase. USD up a tad vs EUR, JPY. Forex markets are largely on hold ahead of the ECB Thursday and US employment report Friday. EUR/USD recently at 1.5436 from 1.5461 late Tues, while USD/JPY at 105.16 from 105.16. EUR/JPY at 162.32 from 162.58, according to EBS. GBP/USD at 1.9552 from 1.9645, while USD/CHF at 1.0419 from 1.0418. (RJF/YUS)

Gilts rebound Wednesday, recouping some of Tuesday's steep price declines, after weak domestic economic data point to slower growth, casting doubts over the BOE's ability to deliver a tighter monetary policy. Allied to weak Nationwide consumer confidence index and CIPS services PMI data, investors' heightened risk aversion reinforces the rally. September gilts trim gains on profit-taking and position-squaring ahead of BOE interest rate decision Thursday. The bank is widely expected to keep rates unchanged at 5.0%. September gilts +0.65 at 106.00, session high at 106.16. 10-year gilt +0.696 at 100.463, yielding 4.94%. (KJE)