ASIA/US/EUR BD & STK RECAP: TSYS RANGE:SHORT-PRE-CHRISTMAS DAY

     US TSYS SUMMARY: US Treasuries open Friday NY -- a short-pre-Christmas

session --steady/slightly weaker out the curve w/ 2/10Y mildly flatter and 5/30Y

curve mildly steeper. Congress passed stopgap spending bill late Thurs, only

needs US Pres. Trump signature to fund govt through Jan. 19th. Meanwhile Trump

could sign the tax bill into law within days, according to a recent AP story. 

- TOKYO: Tsys opened/held mildly lower levels on narrow range into UK crossover.

Muted two-way flow included Asian end-users buying 5s. Foreign central bank

buying in 10s too. Japan's Nikkei stock index ended +0.16%. 

- LONDON: Tsys and rates still hold lower/narrow range, listless 2way trade and

flatteners fading current steepening on shortened pre-holiday session, trading

floors closing at 1300ET. Monday, all US markets and government are closed for

Christmas. Portugal 10Y spd vs. Bunds (+7.7bp) leads widening in sovereign spds,

Spain 10Y +1.7 after Catalan separatists won Thursday election, Spanish stocks

weaker. 

- STOCKS: US stock index futures flat to mildly higher, European stocks mildly

weaker across the board with Spain's IBEX 35 off 1.17% on the day. 

- OVERNIGHT REPO: Current Tsy 2Y, 5Y notes tighten; also old 3Y notes an the

six-month bill see demand too. 

- FT said the bitcoin price fell 20% Friday.

GILT SUMMARY: UK Gilts ended a short Friday session higher with yield curve

shifting circa 2bp lower albeit in very thin pre-Christmas trade, despite

positive under tones of UK final Q3 GDP data and US house passing short-term

funding Bill. 10-yr Gilt yield finished 2bp lower at 1.24%.

 - For once it was European politics that made the headlines this morning, as

overnight Catalan separatists retained a small majority. While markets were

unaffected by US funding deadline extended for 3-week. 

- Gilts initially ticked lower in reaction to annual GDP in the UK being revised

up to 1.7% y/y from 1.5% y/y. The quarterly figure for Q3 remained at 0.4% q/q

and probably masked a stronger performance in a number of sectors. 

- 2-yr swap spreads widen sharply by 5.3bps, however the rest closed little

changed. While breakevens widened led by the +0.6bp move in 5-yr and 10-yr. 

- Next week will be a short working week with markets expected to be very thin

and illiquid as many traders extend Christmas holidays and come back refreshed

for start of 2018.

EGB SUMMARY: The Mar-18 10Y Bund contract made a recovery in mid-morning

European trade and reached intra-day highs of 161.86. However, the push higher

was stymied as price dipped near yesterday's close. Traders note that volumes

are very low today. The 10Y Bund yield is trading almost unchanged. 

- Tensions in Spain's Catalonia region are brewing to new levels as

pro-independence parties win back control. There were reports that Spain's PM

Mariano Rajoy is due to speak at 1300GMT. The Spanish curve has steepened with

the long end of the curve underperforming the most. The 10Y Bund-Bonos spread is

trading 4.7bp wider at 109.7bp. 

- In other peripheral markets the majority of the Italian curve is doing poorly,

taking cue from the Spanish markets. Italian Manufacturing Confidence came in

110.5 slightly below consensus and the Consumer Confidence Index was at 116.6

which was above the consensus level. The Bund-BTP spread is 3.2bp wider trading

at 152.2bp. 

- There appeared medium sized Eur swap flows going through with a EUR42.9k DV01

5Y-10Y swap steepener at 58.29bps and a EUR84.9k DV01 2Y-5Y-10Y swap fly.

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

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