ASIA/US/EUROPE BD/STK RECAP: TSYS FIRMER, FLATTER;EYE FRI JOBS

     US TSYS SUMMARY: Treasuries prices open NY higher, flatter Thurs, last day

before week's key Fri 8:30am ET US Sept nonfarm payroll employment report. MNI

economist poll has median forecasts of 70,000 for Sept jobs, 4.4% jobless rate,

0.3% Avg Hrly Earnings Gain and 34.4 avg workweek. 

- TOKYO: Action fairly quiet as China, S.Korea still on holidays. Tsys flows

proved 2way: FX-tied buying early as US$ weak vs. Japanese yen; real money

buying and Asian banks buying in 10Y notes; prop selling in 2Ys. 

- LONDON: Ongoing bid with early light selling in long end. Recent real$ sales

occurred in the long end, which contained prices. German Bunds recently leaked

lower on interpretation of ECB minutes. Earlier was a large Italy BTP/German

Bund future spread blocked before 5:04am ET, seemed to be buy BTPs/vs sell

Bunds. 

- US SWAPS: Spreads steady/mixed; fast$ 10Y receiving overnight. 

- EURODLR FUTURES: Mostly higher, long end outperforms. 

- O/N REPO: Tsy 3Y and 10Y, old 5Y, old 7Y all tighten. 

- US CORPS/SOVEREIGNS: Nothing firmly scheduled (yet) for today.

EGB SUMMARY: The German 10-year yield is down 1.6 on the day and is currently

trading at 0.434% at 8:24am ET. The Bund yields were also pulled lower by a

rally in French bonds after the French auction results. 

- There was considerable demand for Spanish bonds at today's auction with the

bid to cover ratio for the new 5Y coming in at a healthy looking 2.12x. Given

the Catalan issue, there was a lot of fear leading into the auction. This has

led to a flattening of the Spanish yield curve across all maturities with the

10-year leading the way. 

- Tensions are still visible between the Catalan and the central Spanish

government as Spanish Economy Minister Luis de Guindos rejected the idea of

talks with Catalan leaders. 

- Other peripheral market yields were dragged lower by the demand for Spanish

bonds with the Italian 10-year bond yield dropping to 2.162%. 

- Brent prices reached an intra-day highs of $56.39 per barrel after Russian

President Putin met with Saudi King Salman and said that he was open to the idea

of reducing supplies for a longer period of time.

GILT SUMMARY: UK Gilts are trading steady to higher, with the 5-year part of the

yield curve outperforming despite supply. 10-yr Gilt yield is -3bp at 1.346%. 

- Gilts opened slightly lower, but quickly reversed losses and traded at

unchanged levels as markets digested fallout from the "disastrous" speech by UK

PM May yesterday as Telegraph's headline that 30 MPS were plotting to remove her

from office. 

- Gilts squeezed higher though with markets seeing little concession being built

into the 5-yr area of the yield curve ahead of 2023 Gilt supply. 

- There was a delayed reaction to a tick higher in the tail seen at UK 0.75 2023

Gilt re-opening auction, however, the faded in prices was limited and soon

reversed. DMO sold Stg2.75bln of the 6-yr Gilt at average yield of 0.906% and

covered 2.36 times. 

- Breakevens are around 0.8bp higher across the board, while swap spreads are

mixed with 2-yr 2bp wider and 15-yr 1.5bp tighter. 

- Attention now turns to a raft of US data and Fed speakers, before comments

from BoE's Ian McCafferty at 1700BST.

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

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