ASIA/US/EUR BD/STK RECAP: TSYS HIGHER RANGE: AWAIT FOMC/YELLEN

     US TSYS SUMMARY: Treasuries open NY Wed higher though mildly off 6am ET

session high in quiet range into 2pm ET FOMC mtg statement & Summary of Econ

Projections, then 2:30pm Fed Chr Yellen news conf. Next US econ data: 10am ET

Aug existing home sales (MNI median est 5.44M SAAR) and 10:30am ET Sep. crude

oil stocks ex-SPR. 

- TOKYO: Tsys stabilized after closing NY Tue around day's low price; good

demand in 6M T-bills and short coupons. Foreign central bank buying arose in

2Y-5Ys; other bank buying in 5Ys. Asian end-users bought 10Y, 30Ys, while

insurance portfolios bought off-the-run 10Ys. Australia sold A$600M 2% Dec.

2021, bid/cover 7.4x as a single bidder took whole allocation, once again. 

- LONDON: Tsys and EGBs saw further stabilization amid good German 30Y Bund

auction. Tsys also drew later bid too as European stocks ebbed off highs. Bank

portfolio buying occurred in 3Y notes while macro fund buying arose in 10s. 

- OVERNIGHT REPO: Tsys 2Y, 3Y, 5Y, 7Y, 10y all tight; T-bills tight too. 

- EURODLR FUTURES: Mildly higher. 

- US$ CORPS/SOVRGN BOND ISSUANCE: Russian Federation reopens 2027, 2047 $ bonds.

US TSY FUTURES: Tsy futures trading firmer, upper half of range on average

volume, following firmer EGBs. Day 2 of the FOMC meeting, Fed releases Summary

of Econ Proj'ns at 1400ET, Fed Chair Yellen press conf at 1430ET. US$ a little

softer vs. Yen (111.2865), equities near steady (emini, -0.25, 2504.5) gold

stronger (+3.78, 1314.84), oil firmer (WTI +0.57, 50.05). Current futures

levels: 

* Dec Ultra bonds up 10/32 at 166-25 (166-13L/167-00H) 

* Dec 30-yr Bond futures up 6/32 at 154-10 (154-01L/154-14H) 

* Dec 10-yr futures up 4/32 at 126-03.5 (125-30.5L/126-05.5H) 

* Dec 5-yr futures up 2.75/64 at 117-31.5 (117-28.5L/118-00.75H) 

* Dec 2-yr futures up .75/32 at 108-00 (107-31L/108-00.5H)

     GILT SUMMARY: UK Gilts are trading modestly higher, led by the long-end of

the yield curve dismissing the strong UK retail sales data as markets position

themselves ahead of key Fed FOMC decision. - 2-yr Gilt yield is -1.0bp at

0.402%, 5-yr -1bp at 0.734%, 10-yr -0.7bp at 1.321% and 30-yr -1.9bp at 1.91%

according to Tradeweb. 

- Gilts opened lower but slowing faded the move as markets look ahead to FOMC

and before that UK Aug retail sales, however, there was an article in the FT

that got some attention 

- The FT report said that PM May is going to offer E20bln for Brexit bill in her

speech in Florence, in the hope that it will move negotiations onto the next

stage. While Foreign Secretary Johnson has denied that he is going to resign

before the weekend and says that the government is "working together". 

- Blinked and you would've never have seen the Gilt reaction to better than

expected UK retail sales, with prices quickly recovering from sharp spike lower,

helped by decent 30-yr Bund auction. 10-yr Gilt yield touched 1.354%, highest

since Feb 6, shortly after UK sales data, before recovering.

EGB SUMMARY: The EGB market started quietly but built decent gains in a slow but

sure fashion this morning. There has been an absence of news. German PPI data

was slightly firmer than expected but had zero knock-on to markets. Slovenia

announced a small syndicated taps of their 2027 and 2040 bonds and book building

appeared to be going well. 

- The German auction of the new 30-Year went extremely well and the market has

reacted positively. The current benchmark, the Bund 2.5% 2046 dipped to 130.58

just before auction cut off but quickly rallied in the following minutes to

139.9. - As a result of that auction, the 30Y sector of Germany has extended its

gains and this sector is the biggest yield mover in the EGB space with a 3bp

decline. 

- In Spain, the central government has moved to suppress the potential (illegal)

Catalan independence referendum, arresting 12 senior Catalan officials and

raiding government offices. There is surprisingly little response in the Spanish

debt markets. - The 2Y Schatz yield is flat at -0.688%, the 10Y Bund down 1.6bp

at 0.437%.

--MNI New York Bureau; tel: +1 212-669-6432; email: sheila.mullan@marketnews.com

[TOPICS: MTABLE,MNUEQ$,M$U$$$,MR$$$$,M$$FI$,MN$FI$]