ASIA/US/EUROPE BD/STK RECAP:TSYS DRIFT,AWAIT FRI YELLEN,DRAGHI

     US TSYS SUMMARY: US Treasuries opened NY weaker after overnight profit-

taking consolidation followed Wednesday NY flight to quality rally. 

- TOKYO: Tsys began higher but soon ebbed early amid mild profit-taking sales.

Foreign central bank and end users sold 10Ys, while heavier selling in

intermediates, partly FX related as USD rebounds vs. Yen. Asian bank sales

occurred in US 5s and 10s. 

- LONDON: Tsys continued to drift lower since about 2am ET in two-way flows,

amid better selling/consolidation into week's key speeches, the Fri Jackson Hole

speeches by Fed Chr Yellen (1000ET), and ECB Draghi (3pm ET). Pre-auction short

sales occurred ahead of today's 1pm ET $14 billion 5Y TIPS reopening auction.

EGB peripherals spreads tighter vs. Bunds. KC Fed George said still chance to

hike one more time before end-2017, she supports direction FOMC is moving in. 

- US SWAPS: Spreads mixed, curve steeper. 

- US EURODLR FUTURES: Mildly lower, good voume in Whites. 

- MONTH-END: Morgan Stanley US Tsy bond index has 0.10 years estimated advance

extension into the month-end, which is next Thursday Aug. 31st. 

- Gold is on track to outperform the S&P 500 US stock index for the first time

in six years, said WSJ.

GILT SUMMARY: UK Gilts opened lower and have traded sideways for the remainder

of the London morning session, with the yield curve slightly bear steepening. 

- Gilt 10-year yield is +0.9 bps at 1.065% at 8:22am ET. 

- There was a soft opening in Gilts, with markets seen paring some of the rally

seen on Wednesday afternoon as markets look ahead to 2nd estimate of Q2 GDP data

and later the start of the Jackson Hole conference. 

- While the pound has bounced off overnight lows versus the Euro and the US

Dollar and the FTSE 100 index is ticking higher so far Thursday despite profits

warning from Dixons Carphone. 

- Lower than expected consumer spending and fall in the level of business

investment highlighted in the 2nd estimate of Q2 GDP data lead to a rebound in

Gilts. While newswire reports of a 81k fall in UK net migration also seemed to

underpin recovery in Gilts. 

- Swap spreads are mixed with 2s +1.2bp and 30s -1.3bp. While 10-yr and 30-yr

breakevens are around 1bp wider.

EGB SUMMARY: Extremely slow going today and to demonstrate this, the Bund

contract volume is only about 70% of the (already low) 10 day average. So far,

the Bund yield is almost precisely unchanged from yesterday at 0.377%, hugging

the 200 day moving average like a life preserver. 

- Non-German yield curves are steepening slightly and we would point out the

5-30Y box spread between France and Germany. This spread is now around 49bp

after rising further today, which is only 4bp below the steepest since EMU

began. 

- There is a small tightening in peripheral spreads, reversing some of the

movements of the past week. The Bund-BTP spread is down 1bp but strangely, the

Bund-Bonos spread was 1bp wider. 

- German paper is outperforming the swap curve and the RXU7 invoice spread is

46.7bp, its highest since mid-June. German 10Y Bund 0.378, yield up 0.4 bps on

day.

- There was no important economic data or supply although we have received a lot

of commentary parsing the words of ECB's Wiedmann and Hansson from yesterday.

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

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