ASIA/US/EUROPE BD/STK RECAP:TSYS WEAK:RISE ON JOBS,FALL ON ECB

     US TSYS SUMMARY UPDATE: Tsys had brief short-covering rally on weaker than

expected August jobs report. Then Tsys reversed lower on BBG ECB story saying

ECB taper plan finalization may not be ready until December ECB meeting;

implication being: this is risk asset friendly.

- 

US TSYS SUMMARY: US Treasuries open NY weaker after some give-back of Thursday

gains tied to month-end buying and FX-tied buying, and now all await 8:30am ET

US August nonfarm payroll employment. Sep/Dec Tsy futures roll largely done,

quiet start to new month. The MNI economist poll has a median estimate of 180K

for Aug jobs, 184K NFP private payrolls, 4.3% jobless. 

- TOKYO: Tsys traded mildly weaker/narrow range through Asia hours, slight

giveback of mnth-end buying. Relative value accts, Asian banks sold 5s and 10s.

Some South Asian countries were out on a holiday.

- LONDON: Tsys had brief bid in early hours then steady selling. Sources

reported cross-current flow from bank portfolios in intermediates. 

- TSY FUTURES: Block buy in Dec 10y Ultra futures at 7:42am ET at 136-14.5.

- US SWAPS; modestly wider, spd curve flatter. At 10:00 BST (5am ET), there

appeared to be US$200M receiver of USD 3Y at 1.62%, but cd be dealer hedge trade

in reaction to $500M+ 2Y/1Y receiver 3mins before. Eurodollars, mildly lower

across the strip. 

- O/N REPO: Most Tsys issues calm into long US Labor Day holiday weekend 

- US HIGH-GRADE CORPORATE BONDS: Nothing scheduled Friday.

EGB SUMMARY: EGBs have mostly moved sideways throughout the morning, with the

Eurozone PMI data providing little impetus. The only significant reaction in

Bunds to a PMI was to the stronger-than-expected UK manufacturing PMI numbers. 

- ECB hawk Nowotny said that he would not overdramatise or over interpret the

Euro's rise vs the dollar and that the ECB job regarding QE is how to initiate a

careful normalisation, not an abrupt end. 

- Purely as a result of these comments. The Bund yield is now up 2bp but the

15-30Y BTP is suffering more still. The Bund-BTP spread tightening has

disappeared faster than an Alexis Sanchez transfer hope. 

- We noted a decent sized swap steepener trade occurring in the wake of the

Nowotny comments. - All EGB yield curves are bear steepening in response to his

comments. He is a known hawk and so what is happening is being helped by some

stop losses.

GILT SUMMARY: Gilts are trading modestly lower across the curve having reversed

earlier squeeze higher, as they take cue from fall in German Bunds in wake of

comments from ECB Nowotny -- "would not overdramatize Euro's rise vs US Dollar".

- Gilts opened on the soft side, but slowly regained lost ground and ticked

higher but volume was light with majority in the markets seen side-lined ahead

of key US non-farm payroll and average weekly earnings data. 

- Gilts pared gains though and head back toward unchanged levels as UK

manufacturing PMI surprised to the upside, rising to 56.9 in August vs an

upwardly revised 55.3 in July. 

- The future broke back into negative territory, taking cue from nudge lower in

German Bunds as France announced long-end supply for next week. Another spike

lower in Bunds in wake of Nowotny comments on the Euro then saw Gilts drop to

fresh session lows. 

- Swap spreads are mixed, while breakevens are marginally wider.

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

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