ASIA/US/EUROPE BD/STK RECAP: TSYS EBB:EYE DEC HIKE, TAX REFORM

     US TSYS SUMMARY: US Treasuries opened NY lower, flatter after overnight

technical ebb, selling tied to tax reform and/or Dec rate hike jitters, and

pre-auction sales/shorts into 1pm ET $28B 7Y auction. Good 10Y Tsy futures

volume: TYZ over 525K. 

- TOKYO: Treasuries initially saw mild position-squaring bid, then brisk sales

in futures and cash as JGBs declined on soft 2Y JGB auction. Tsys technical

selling as 10Y yield rose above 2.326% 200-day moving average. Tsy 10Y futures

hurt by heavy put buying; decent buying TYX 124.5 puts (38.9k w/18k Block from

14- to 19/64). Asian banks sold 10Y, others liquidated Tsys holdings. Asian

stocks mixed: Japan's Nikkei +0.5% but China, HKG stocks ebbed. 

- LONDON: Again 10Y Tsy futures saw busy volume, with end-users doing curve

flatteners against recent curve steepening; some did 5/10Y vs. long end

flatteners. Real money sold 10Y, while others sold front end. End-users bought

7Y, 10Y, 30Y Tsys. 

- US SWAPS: Mixed: Overnight real$ and macro paying in 10Ys. 

- OVERNIGHT REPO: Tsy 2Y, 3Y, 5Y, 7Y, 10Y notes all tight; 30Y calm. 

- US SOVEREIGN/CORPORATE BONDS: Thurs: Kingdom of Belgium $1.5B long 2Y (MS-4)

and EBRD $500M global long 3Y (MS+5s) via BARC/C/CRAG

GILT SUMMARY: Gilts are trading lower, but off opening session lows, more than

likely helped by a block buy of 2,372 G Z7, as markets look to take profits

following sharp move lower yesterday and this morning. 

- UK 10Y Gilt yield is 1.3975, up 2 bps. 

- Gilts opened sharply lower with the 10-year part of the yield curve seen

leading the underperformance which hit a high of 1.428%. Pressure was seen from

US Trump's tax reform plan added with Fed hawkish talk on rates, comments from

BoE Haldane that "nearing a point" for a rate hike and that should not be "a

source of fear" and newswires reports of possible Brexit concession from EU on

transition talks, before market turned around following light buying.

 - A 2-day Bank of England 20-year independent conference started, but there was

no mention of monetary policy in Governor carney's welcoming remarks. 

- UK Brexit Secretary Davies, said there had been considerable progress at

latest round of talks with EU, but they still disagreed role of ECJ and

settlement bill. While Barnier said "sufficient progress" not yet made.

EGB SUMMARY: Core European markets opened in a catch-up play to a poor Treasury

market performance in Asian trading. In turn, Treasury weakness was mostly

linked to the Trump tax plan. 

- The 10Y Germany yield is 0.489%, up 2.5 bps; had been 0.504%, earlier for the

the first time the yield has been above 0.5% since Aug 1. 

- Peripheral EGB markets rallied quite hard after the Italian auction cut off.

The Bund-BTP spread slipped 2bp since the auction to 165.6bp, with similar

movements in other peripheral markets. 

- In terms of data, EMU economic confidence hit 113.0. It briefly hit 113.3 in

2007, otherwise it is the highest in 17 years. 

- Spanish CPI numbers printed light of expectations at 0.6%M/M. German State

data point to an above consensus print when National data are released at

1300BST. 

- Irish debt has been stable today, even though this market would be the most

vulnerable to a 20% corporate tax rate in the US. Remaining market moving events

are likely Fed speakers and a 7Y UST auction.

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

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