ASIA/US/EUR BOND/STK RECAP: US TSYS WEAK;EYE HSE,SEN TAX VOTE

     US TSYS SUMMARY: US Treasuries open NY mainly mildly weaker, 30Y exception

as 2/30Y, 2/30Y and 5/30Y all see curve flatteners after Monday sharp steepening

move. Big news today is the House tax bill vote at 1:30pm ET; Senate then votes

soon after. Traders appear to believe most stock-boosting/Tsys pressure effect

of tax bill passage may potentially be all priced in, given long preparation for

today's key congressional votes. 

- TOKYO: Tsys opened mixed, holding range into UK crossover. Mkt players faded

Mon's steepening; flow included buyers of 30s, 5s30s flatteners, two-way in

short end. Asian central bank buying arose in 5s, while institutional accts sold

short end vs. 5s, 10s. Asia real$ bought long end. 

- LONDON: Carry-over long end bid, long end Tsy futures making new overnight

highs in last hour. 

- OVERNIGHT REPO: Tsy 2Y notes tight: shorts set into next wk 2/5/7Y auctions. 

- US SWAPS: Steady to mildly wider. EURODLR FUTURES: Recent large sale of 20K

EDM8 at 98.065. 

- US HIGH-GRADE CORPORATE BOND ISSUANCE: Nothing expected. US high-grade, US

high-yield and EMG Mkt CDXs all tighten.

EGB SUMMARY: 30-yr part of core/semi-core EGB markets are underperforming ahead

of NY opening, weighed by overnight steepening in the US Treasury curve and

continued rise in Eurozone 5Y5Y inflation forward. German 10-yr Bund yield is

2.2bp higher at 0.331%, albeit in light volume and lack of depth to the market,

while 30-yr is 3.0bp higher at 1.15%. 

- Eurozone 5Y5Y inflation forward rose to 1.745% fresh 10-month high which some

attributed to rise in long end yields. While comments from ECB Hansson that he

expects the ECB to adjust its communication in the first half of 2018 also seen

weighing on sentiment. 

- EU periphery bonds though have enjoyed another solid day, led by a 2.1bp

tightening in Bund/Bonos spread to 110.5bps, despite expectation Thursday's

election will be inconclusive. 

- German IFO came in mixed with both business climate and expectations falling

slightly, however current assessment ticked higher and IFO said that German

businesses were "full of festive spirits".

GILT SUMMARY: Gilts are trading steady to lower in light pre-Christmas trade

with the yield curve steepening as the long-end is weighed by overnight

steepening move in US Treasuries and as markets take profits on flattening move

seen last week. 5s/30s is 1.5bp wider at 101.9bps compared to yesterdays fresh

9-year low of 100.2bps. 

- There has been a dearth of UK data released today so attention has been on

German IFO and movement in US Treasuries, so news that US Tax reform is likely

to get voted through on Wednesday weighed on the long-end of the curve first

thing. There was little to no impact from mixed German IFO numbers, but gilts

faded lower taking cue from sell-off in Bunds, probably led by hawkish

interpretation of ECB Hansson comments. 

- Wrangling over if the UK could get a bespoke trade deal with the EU continued,

but was likely just grand standing before talks start in March. 

- Swap spreads are marginally tighter led by 2-yr and breakevens a touch wider.

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

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