ASIA/US/EUROPE BD/STK RECAP: TSYS EBB:RISK-OFF UN-DO,YELLEN,2Y

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

drift within tight ranges followed Monday safe-haven rally on N.Korea, Germany

election and Mideast (Iran, Turkey, Iraq) factors. Cahs 10-year note is at

2.223%, vs overnight high yield of 2.227% hit at 3:58am ET and overnight low

yield of 2.214% hit at 7:02 am ET. Gold, crude oil weaker. 

- TOKYO: Tsys saw some profit-taking on Mon risk-off bid but US-N.Korea tensions

remain high; China officials sought to squelch rhetoric; US' Mattis urged

N.Korea to keep on diplomacy route. Tsys saw FX-tied sales, Asian banks did

two-way flows in 10Y notes; others sold 30Y bonds, while end-user buying

occurred in 30Y bonds too. 

- LONDON: Tsys had a sideways trade amid mixed intermediate flows, prop account

buying in belly, while light bank portfolio buying in 30Ys. 

- US SWAPS: Spreads steady/mixed, recent 10y receiver, rate paying in belly. 

- US HIGH-GRADE CORPORATES: Tues:BNG $2.25B 3Y, Ontario 5Y, CK Hutchison

3Y/5.5Y/10Y, Nederslanse Waterschapsbank 2Y FRN tap. Saudi 5/10/30Y Wed. 

- OVERNIGHT REPO: Again Tsy 2Y, 3Y, 5Y, 7Y, 10Y notes tight. 

- US STOCKS: Stocks futures mixed: DJIA, S&P Emins lower; Nasdaq firmer.

GILT SUMMARY: The UK Gilt curve flattened on Tuesday but net movements were

quite small. The Gilt future started on the back-foot and gradually recovered

through the morning session. There was no data and no supply and so the session

ebbed and flowed with the EGB market. 

- Where there was some independence was in the index-linked space where the real

yields at the top end (30Y) of the curve were rising -- building in a concession

for the Stg950mln 2036 index-linked auction tomorrow. 

- Pension funds were evident in the 15-30Y nominals and the 25Y area was easily

the best performing section of the curve on Tuesday. 

- UK Gilts have cheapened to GBP swaps and Germany considerably over the past

week but this move appeared to run out of steam on Tuesday. Cash Gilts were

volatile vs swaps but finished the day close to unchanged. The Bund-Gilt spread

declined 1.5bp from yesterday's nine month high of 93.1bp. 

- European Council President, Donald Tusk met Theresa May on Tuesday and

welcomed the UK's new 'constructive' approach but said that insufficient

progress had been made in talks.

EGB SUMMARY: The Bund contract started poorly but the absolute and net movements

have been extremely limited today, mainly down to a lack of market-moving

information. - Overnight, the US dismissed the North Korean implied declaration

of war but there was no response from North Korea. 

- Italian paper came under some pressure early in the day but peripheral markets

are making a come-back and we hear of real money interest in the 5-10Y area of

the Spanish curve today. 

- Italy successfully sold E3.0bln combined of CTZ and BTPei paper; the strongest

interest showed up in the 5Y linker. 

- Germany saw very strong demand for its fairly new Sep-19 Schatz. This auction

result has aided a additional increase of the Schatz invoice spread. Since the

German election result, this spread has jumped from 51bp to 54.3bp. 

- French business confidence was the only economic release of note but stayed at

109 in September compared to expectations for a small rise.

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

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