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Coming up in the Asia-Pac session on Tuesday:


Coming up in the Asia-Pac session on Tuesday:


GS: Payrolls Doesn't Change Faster Taper & First Hike In June Call


Bull Theme Remains Intact


Strong Stocks, Rebound for Oil Weighs on Tsys


Trend Signals Still Point South

     US TSYS SUMMARY UPDATE: Treasuries rallied in early NY Thurs amid German
Bund improvement, heavy buying in Tsy futures (two large block trades before
8:30am ET) and later FX-tied buying by black boxes as US Pres. Trump further
sanctions vs. N.Korea spur weaker US$/stronger Japanese yen.
US TSYS SUMMARY: Treasuries prices open NY Thurs higher, flatter after overnight
range trade followed Wed FOMC unchanged policy & anncmt on Oct start of Fed
balance sheet rundown. 
- TOKYO: Tsys saw quiet start, range amid buying by Japanese accts in 5Ys, Jpn
bks in 10Ys, Jpn insurance portfolios in 30Ys. Jpn asset mgrs and Asian central
banks bought 2Y, 3Y, 5Y, 7Y notes. Some brief selling arose as US$ gained, but
fast money bought dip. S&P Ratings cut China sovereign rating one step to A+,
stable outlook. - LONDON: Tsys drift lower within range as EGBs pressured by
heavy Spain, France govt debt issuance. Bank portfl buying arose in US 2Ys,
while TIPS saw mixed flows, and two-way trade in nominal 5Y, 10Ys. Bank sales in
- US SWAPS: Mildly wider for most part, spread curve steeper, some buying of
corporate bonds on asset swap spread basis. 
- US EURODLRS: steady short end, mildly lower out strip. 
- OVERNIGHT REPO: Tsy 2Y, 5Y, 7Y, 10Y notes all tight; T-bills cool off. 
- US HIGH-GRADE CORPORATE BONDS: Newcastle Coal eyed 10Y benchmark note.
GILT SUMMARY: Gilts opened sharply lower and have pretty much stayed there since
with the Dec Gilt future contract trading in a very tight 19 ticks range with
volumes slightly below average, as markets react to FOMC decision last night 
The 10-yr part of the yield curve is seen leading the underperformance with
yield 2.5 bps higher at 1.361% at 9:59am ET.
- There was only a marginally recovery in Gilts when latest UK public sector
borrowing numbers came in below consensus. The UK borrowed Stg5.669bln in
August, below the Stg7.3bln expected and lower than the Stg6.92bln in Aug 2016,
helped by rise in VAT receipts. 
- There has not been much UK news overnight, however attention will be turning
to the cabinets Brexit meeting this morning and is expected to sign off on May's
Florence speech, which has been described as open and generous, however weather
the EU see it that way will be another matter. 
- UK breakevens have widened with 5-/yr & 10-yr around 1.5bp higher, while swap
spreads are mixed with 5-yr and 10-yr around 1bp tighter & 7-yr 2.3bp wider.
EGB SUMMARY: For most of the morning, the Bund contract was left alone to nurse
losses. We heard from several sources that cash bond activity was either 'quiet'
or 'dead'. Bund cash 10Y improved around 8am ET, then some profit-taking, then
rose again around 9:43am ET.
- Earlier action had some small selling in Spain and BTP future also came under
quite significant selling pressure. The BTP 4.75% Sep-28 is the IKZ7 CTD and
also the poorest performing Italian bond this morning. 
- 10-Year Bund-BTP spread has widened about 2.5bp today and far outpaces the 1bp
widening in Spain, which might have been expected to widen more because of the
Catalan issue and the Spanish auctions. One market contact speculated that
perhaps the Bank of Spain might be active in PSPP buying. 
- German cancelled a November Obl auction in its Q4 issuance programme because
of lower funding needs. 
- French and Spanish auctions have gone through without a hitch but the close of
the French linker auctions coincided with a small dip in the Bund that took the
contract down to the low of the day. 
--MNI New York Bureau; tel: +1 212-669-6432; email:
[TOPICS: MNUEQ$,M$U$$$,MR$$$$,M$$FI$,MN$FI$]