ASIA/US/EUROPE BD/STK RECAP: TSYS BID;EYE 11AM ET SEN TAX VOTE

     US TSYS SUMMARY: US Treasuries opened NY higher, flatter after US Senate

Thurs night postponed GOP tax bill vote to 11am ET Fri, amid need for compromise

as various GOP sides want different bill contents. 

- TOKYO: Senate GOP debate progress slowed late Thurs so vote delayed. That

spurred Tsys buying amd mixed Asian stocks performance amid risk-off mood. Tsys

aided by leftover month-end buying in long end, and Japanese lifers and pension

funds buying; others did 5/30Y flatteners. 

- LONDON: EGBs drew better buying, aided Tsys. Some bought 10Y around 2.40% key

level around 3:26am ET; end users and fast money bought intermediates. EGBs

aided as EU stocks sank amid apparent mistaken Fiat stock trade that spurred

algo selling; EU tech stocks -5% earlier. Eonia spiked UK Gilts sharply higher. 

- OVERNIGHT REPO: Tsy 5Y notes tight still at -1.25% but off extraordinarily

tight -3.5% Thur; also old 2Y, 3Y, 10Y mildly bid. 

- US SWAPS: Mixed, spd curve steeper vs. flattening in Tsys. Swaps had switch

around 2.0675-2.0875%, recent paying 5s, 10s, 5/10 steepeners. 

- US$ HIGH-GRADE CORPORATES: Nothing Friday so far. Will be busy week next week.

GILT SUMMARY: Gilts are trading sharply higher, led by the 10-year part of the

yield curve, as there is fresh doubt on there being some form of agreement on

the Northern Ireland/Ireland border issue before PM May and EU Juncker meeting

on Monday. Even stronger than expected UK manufacturing PMI did not dent rally

in Gilts. 

- Gilt 10-yr yield is 4.3 bps at 1.285%. 

- The UK Committee for Exiting the EU have said that it is not possible to see

how the border issue in Ireland can be resolved after Brexit, casting doubt that

a way forward could be found ahead of crucial EU leaders Summit in 2-weeks time.

While Ireland are asking the UK to agree "wording" to avoid a hard border. 

- UK manufacturing PMI for Nov increased to 58.2, highest level in 4-yrs from an

upwardly revised 56.6 in Oct, beating consensus of a small rise to 56.5. 

- UK Breakevens have continued their tightening move as linkers lag rally in

nominal Gilts. 5-yr is 0.5bp tighter at 2.9%. Swaps spreads are wider by around

1.5bps with the exception of the 30-yr which is 0.5bp tighter.

EGB SUMMARY: European bond markets have been beset by a risk trade in the

morning. EGBs have risen almost as fast as equity markets have fallen. 

- There is a possibility that the start of the month has set off a small

re-balancing but early in European trade, stocks sank rapidly and there may have

been a fat-finger involved in Fiat stock that set off a round of algo selling.

European tech stocks are down by around 5%. The Bund 10Y is -4.2bp at 0.325%. 

- However, there was no respite and ahead of the Senate tax vote hike, investors

are likely reluctant to add risk. 

- Eonia's spike has attracted attention again. The best explanation seems to be

speculation that a bank stopped borrowing from the ECB MLF at 0.25% and switched

to interbank. With low eonia volumes, the resulting influence on average rates

was large. It also opens the possibility that the spike does not fully reverse. 

- Eurozone manufacturing data for November were largely a non-event printing

close to expectations and rising from 60.0 to 60.1. 

- France announced that it would sell only 4-5bln of OATs next Thursday and this

has helped the long end of France to outperform Germany slightly.

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

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