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US TSYS SUMMARY: US Treasuries open NY weaker after overnight give-back of
pre-weekend safe-haven buying tied to US/N.Korea tensions; curves mixed with
2/5Y, 2/10Y steeper but 5/30Y marginally flatter.
- TOKYO: Saw Japanese markets "catch up" Monday after a one-day Japanese
holiday; NIkkei ended off 0.98%. Japanese 2Q GDP rose to 4% annualized. Tsys saw
some safe-haven unwinds though Japan deployed Patriot anti- missile batteries in
4 western prefectures; China banned some N.Korea imports such as lead & "sea
products. Japanese banks and Mideast central banks sold Tsys, while MBS-tied
selling in Tsys, end-user MBS selling.
- LONDON: Tsys saw carryover weakness, declined with softer German Bunds, UK
Gilts. And stronger European stocks spurred risk-off uwninds too, as fast$ and
real$ sold 10Y notes.
- US SWAPS: Steady/marginally mixed.
- O/N RP: 2Y Tsy note tighter; 3/10/30Y auctions settle Tues.
- Eurodlr futures: Lower; large sale of about 19.8K Mar'18, 98.50, partially
tied to 4,000 Mar'18/Red Sep'18 flattener.
- HIGH-GRADE CORPORATE BOND ISSUANCE: Amazon investor calls Mon via BAML/GS/JPM,
then 144a/RegS multi-part deal to follow.
EGB SUMMARY: Bunds have started the week by giving back a portion of the large
gains of last week. Within the first hour of trading, the Sep-17 contract had
fallen below Friday's low of 164.19. The move is driven by a risk on sentiment
as the North Korean headlines have ebbed.
- At around 09.20BST, news emerged that China had decided to ban import of coal
and other products from North Korea and so hopes of a diplomatic solution rose,
hurting Bunds in the process.
- Italian government debt is strongly bid a newspaper report picks up upon the
recent decline in Italian bank NPLs caused by rapid sales. The Bund-BTP spread
is 4bp tighter at 161bp but Spanish debt is moving more rapidly to 103bp. Spain
is being assisted by a very positive article about Spanish growth in the WSJ
alongside a decline in geo-political risks.
- Germany issued a new 6m bubill this morning and France does the usual bill
auctions this afternoon but there is no bond supply this week.
- Data has seen Eurozone IP data come close to consensus. Portuguese GDP missed
expectations and grew only 0.2% in Q2.
GILT SUMMARY: The UK Gilt market opened lower after a weekend in which fears of
an escalation in the North Korean issue proved false. Indeed, hopes of a
diplomatic solution appeared to rise slightly as the head of the US military
stressed the need for a diplomatic solution.
- The 10-Year Gilt suffered more when it was announced that China would ban the
import of coal and other materials from North Korea. Currently, the 10-Year
yield sits 2.5bp higher at 1.087%.
- The 2-10Y Gilt curve steepened in the bear market movement while the 10-30Y
section flattened. The flattening of the 10-30Y spread in Gilts was not mirrored
along the swap curve but
- The index-linked market suffered hard on Monday morning and the 10Y real yield
rose by 3.5bp to -1.91%. However, the move should be put into a context of a
13bp decline in yield last week.
--MNI New York Bureau; tel: +1 212-669-6432; email: firstname.lastname@example.org