ASIA/US/EUR BOND & STOCK RECAP: TSYS WEAKER, TECHNCL SALES

     UPDATE MIDDAY NY: Treasuries slumped lower Wed after technically-inspired

selloff, amid EGB pressure too; US bonds improved off lows as US stocks

weakened. 

US TSYS SUMMARY: Treasuries open NY weaker after overnight range, then a gradual

ebb lower since 5:36am ET when 10Y yield hit 2.446% session low yld to now,

2.468% 10Y yield; 10Y yield hit 2.472% day's high yld at 7:32am. US House will

take minor US tax bill procedural re-vote Wed; bill then goes to US Pres.

Trump.) US stock futures higher, oil higher too. 

- TOKYO: Tsys opened firmer in rebound after Tues sharp selloff, range into UK

open. Credit and macro fund buying/short-covering, while Japanese insurance and

pension fund buying longer Tsys. 

- LONDON: Core EGBs weaker, pressured Tsys/sellers emerged after carryover bid.

Misc acct buying 10s. Large Tsy futures block buy 14,560 FVH 116-04 at 5:21am

ET/10:21 am GMT. Fast$ buying cash 2s, prop acct 5s/30s steepeners. Eurodlr

futures mildly weaker. 

- OVERNIGHT REPO: Tsy 2Y note tight at 0.73%. 

- US$ HIGH-GRADE CORP BONDS: Nothing.

EGB SUMMARY: After spending much of the morning trading around Friday's closing

level the Mar-18 10Y Bund contract dropped lower and broke through the previous

day's low of 162.15 and is currently trading at 161.98. German 10Y Bund yield is

higher by 2.0bp at 0.399%. 

- The move lower occurred at a similar time to the Bund-BTP future block went

through, 2,210 RXH8 @ 162.32 vs 2,698 IKH8 @ 137.48. Traders note that markets

remain thin due to the holiday season and therefore price movements may remain

exaggerated. 

- The 4-7Y part of the core EGB yield curve is underperforming likely on the

back of the ECB hawkish commentary yesterday. 

- Portugal has been the star performer so far Wednesday with PGB-Bund spread

7.5bp tighter at 137.6bp, which is the lowest since March 2015. Spain and Italy

are jumping on the tightening move in Portugal. 

- In Spanish news the country gets ready for the Catalan elections on Thursday. 

- Looking ahead markets will focus on the Existing Home Sales data for November,

which is due to be released at 1500GMT.

GILT SUMMARY: The long-end of the UK Gilt yield curve has come under high

pressure this morning, in-turn steepening the the yield curve as markets dismiss

hard-line opening position of the EU in transitional talks and downgrade to UK

growth by the IMF, as market react positively to BoE plans to keep City of

London operating after it leaves the EU. 

- BBC reports that the BoE is to release plans allowing European banks to

operate in the UK as normal post Brexit. The BBC has learned that banks offering

wholesale finance - money and services provided to businesses and each other -

would operate under existing rules, and it would apply even in a 'no-deal'

scenario. BoE is expected to release these plans at 1300GMT 

- Barnier said Brexit transition can only go to end of 2020, would have to abide

by all EU rules and respect customs union. While IMF cut UK GDP to 1.5% y/y. -

 Swap spreads are marginally tighter with exception of 2-yr which is 0.5bp

wider, while breakevens are 0.7bp to 2.2bp higher with curve steeper.

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

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