ASIA/US/EUROPE BD & STK RECAP: TSYS 2-WAY TRADE INTO FOMC MINS

     US TSYS SUMMARY: Treasuries prices open NY weaker, steeper after overnight

drift since 3:30am ET then move off overnight lows around 6am ET. Tsys improved

with EGBS as Reuters said ECB Draghi would not make new policy changes at the

Jackson Hole Fed conference. Traders now await 2pm ET FOMC meeting minutes

release. 10Y 2.278% vs. 2.285% day high yld of 5:46am ET. 

- TOKYO: Tsys range amid early 2way flow, initial dip buyers, and credit-tied

selling with ready bids below. Asian end users bought 10Y note. 

- LONDON: Tsys saw end-users buying short end, real$ selling 5Y, 10Ys early. EGB

buying flurry on Reuters ECB story saying Draghi will hold off policy "debate"

until autumn. Foreign central bank buying occurred in 2Y, 3Y; fast$ bought 5Ys.

Misc accts bought 10Y, 30Ys. Atl. Fed Bostic told CNBC US economy will look much

better in 2H; worried on inflation but not seeing sustained inflation. 

- US EURODLR FUTURES: Steady to mildly lower out strip. 

- US SWAPS: Steady to mildly wider out curve; mild deal-tied paying. 

- O/NIGHT REPO: Tsy 2Y, 5Y notes traded tight. 

- HIGH-GRADE CORPORATE BOND ISSUANCE: VMware 3Y, 5Y, 10Y, Commonwealth Edison,

Muni Finance.

EGB SUMMARY: The EGB market started poorly but spiked aggressively higher upon a

Reuters story that claimed Draghi would not make any significant policy

announcements at Jackson Hole (Aug 24-26). 

- The curve bull-flattened but the enthusiasm waned rapidly and within 40

minutes, the market was trading lower than before the story's release. 

- Core EGBs are suffering from the largely risk-on sentiment and the rise in

equity markets. Strong UK employment data also prompted some additional

weakness. 

- Pres. Donald Trump tweeted negatively about Amazon and the equity's price has

dipped strongly in pre-market trading but it failed to influence EGBs. 

- Core EGB markets have felt heavy throughout the day but there is still a good

bid for the periphery and so the Bund-BTP and Bund-Bonos spreads have tightened

by 3bp each. The Spanish spread is almost back to 100bp. 

- In terms of data, Q2 Eurozone GDP matched the pre-flash estimate of 0.6% Q/Q. 

- The market is looking forward to the FOMC Minutes, being released after the

European close tonight at 2pm ET.

GILT SUMMARY: Gilts are languishing near session lows, curve bear steepening,

reacting to better than expected UK labour market data after starting slightly

weaker on mild risk-on sentiment.

- Gilts opened Wednesday modestly lower seen weighed by a mild risk-on tone as

equities opened in positive territory and European periphery bonds ticked

higher, despite the lack of real direction seen overnight in Asia. 

- Gilts did temporarily recover, taking cue from spike in German Bunds following

a Reuters ECB sources story that President Mario Draghi will not convey a new

policy message at Jackson Hole. 

- However, UK unemployment dropping to 4.4% in June from 4.5% in May and a

surprise rise in total weekly earnings to 2.1% from 1.8% saw Gilts drop sharply

and eventfully hit fresh session lows. Real earning though remained negative. 

- Swap spreads are tighter with the exception of the 10-yr which is marginally

wider. While UK breakevens are around 1bp higher across the board.

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

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