ASIA/US/EUROPE BD/STK RECAP: TSYS EBB: KOREA SAFE-HAVEN UNWIND

     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: sheila.mullan@marketnews.com

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