ASIA/US/EUROPE BD/STK RECAP: TSYS BEGAN WEAK,RALLY ON CORE CPI

     US TSYS UPDATE: Treasuries rally on tame 0.1% Sept. Core CPI. Cash 10-yr

note is at 2.280% at 9:46am ET vs. 2.33% pre-CPI. 

US TSYS SUMMARY: Treasuries opened NY mildly weaker, 5/30Y flatter, 2/10Y mildly

steeper after overnight range into today's key 8:30am ET US Sept. CPI and retail

sales. US stock futures traded mildly firmer; oil traded lower. 

- TOKYO: Tsys again enjoyed brisk buying across Asia for a second day. Chinese

and Japanese entities bought at the long-end of the Tsy curve. Also heard of

Asian central bank selling in older 3Y Treasuries. Insurers sold long end Tsys.

Some accts did intermeds/30Y Tsy flatteners. 5-year paying occured in US swaps. 

- JAPAN MOF: For first week of new fiscal half year, Japanese MOF data showed

Japanese accounts in most recent weekly data bought just Y89.2bln ($0.8bln) in

foreign bonds vs sales totalling Y1.0trn in previous week through Sep 29. 

- LONDON: EGBs rallied hard on Reuters 'ECB source' article that said the

consensus developing for 2018 APP bond-buy plan is a 9 month extension. Tsys did

not respond. US swaps showed SEF analysis with 2-10Y flattener early. 

- US CORPS/SOVS: Quiet Fri: Citi eyed fixed/FRN benchmark 3Ys. China aims for

Oct. 26th $2B-ish US bond, first US$ bond since 2004, said BBG.

EGB SUMMARY: The German 10Y Bund yield had gained and rose more after US CPI;

10-yr yield is at 0.401% 4.1 bps lower on day. Almost all yield curves across

the EGB markets are flatter this morning. The initial upward morning price

action in the Bund Dec-17 contract was cash led, which triggered stop-losses

elevating prices further. The contract is trading near its intraday highs of

161.90. 

- Once the initial upward move in the Bund had occurred price action ran into

selling with some talk of flattener trade unwinds in the cash market in Germany

between 2Y and 10Y. 

- The swings in the Gilt market were then responsible for some EGB yield

movements. Brexit transition period talk created decent price swings but little

net direction. - Activity in the peripheral EGB markets was side-lined. Italian

and Spanish spreads to Germany were little changed in the morning session. 

GILT SUMMARY: Gilts are trading steady to lower, but moving only slightly from

Thursday's close as markets continue to digest the latest round of Brexit talks

and the likelihood of talks progressing to the next stage, following a glimmer

of hope from EU's Chief negotiator Michel Barnier. 

- Juncker though reminded the UK that the Brexit process will take longer than

it thinks dashing some of those hopes and a sudden fall in sterling led to Gilts

bouncing off session lows. 

- 10-yr Gilt yield is 1.361%, 1.7 bps lower. 

- Gilts opened little changed but then spiked higher, taking cue rom sharp spike

in German Bunds, however, quickly reversed gains and traded lower as markets

built up some hope of Brexit at least moving onto talks about a transition

agreement and sterling move higher vs USD and Euro. 

- Both swap spreads and breakevens are little changed Friday with attention now

seen turning to key US inflation and retail sales data for September

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

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