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US TSYS SUMMARY: US Treasuries prices open NY mildly weaker, steeper amid
softer EGBs, off late overnight lows, with 1pm ET US$24B 3Y auction. US stock
index futures narrowly mixed, S&P Eminis and Nasdaq down but DJIA mini up.
- TOKYO: Tsys had near steady open then got sold on strong Asian stocks (Nikkei
+1.7%, Hong Kong Hang Seng +1.3%). Tsys also had pre-3-yr auction short-sets,
selling in 10s, FX-tied sales as US$ bounced vs. Yen (114.124).
- LONDON: Tsys held narrow/lower range during early hours, pressed as German
yield curve steepened on Austria and German linker supply. US 10-yr bottomed out
4:28am ET, 2.340% day's high yld. Dip buyers after weak -1.6% German indl prodn,
Tsys lag. Bank portfolio sales in US 5s, 2way in 10s, fast$ sold across curve.
- Swaps spds steady/mixed, wings mildly wider. Sources cited rate receiving in
short end earlier, followed by payers in 3s (1.9387) and receivers in 4s, 5s.
Eurodlr futures lower.
- US CORPORATES: High-grade debt issuance busy: 5-part Oracle debt, Rentenbank
10Y, Canada 5Y, and NWB 4Y Green bond, others.
- OVERNIGHT REPO: US 3Y, 10Y note tight amid 3/10 shorts; old 3Y, 10Y tight.
07:21 11/07 EST EGB SUMMARY: /SWAPS: European swap markets have seen a
number of curve trades: - At 12:13GMT there appeared to be a EUR100.1k DV01
5Y-10Y steepener at 63.9bp - At 12:09GMT there appeared to be a EUR99.8k
10Y-11Y-12Y Fly, receiving the belly - At 11:55GMT there appeared to be a
EUR149k 7Y-8Y-9Y Fly, paying the belly
GILT SUMMARY: Gilts have recovered earlier losses and are now trading higher led
by the outperformance of the ultra-long end and in turn flattening the yield
curve, as DMO receives strong demand for new 2048 Gilt Linker and markets report
strong buying in futures.
- Earlier Gilts dipped lower weighed by European bond supply, announcement of
2048 IL Gilt syndication and rally in US Dollar which forced US Treasuries
- Gilts recovered though, underpinned by strong demand at Austria, German, EFSF
dual trance and UK linker supply, and then spiked higher on strong bid in
futures. - UK received over Stg25bln in orders for the new Stg3bln 0.125% Aug
2048 IL Gilt with spread set at UKTi 0.75% Nov 2047 +1bps.
- UK breakevens are around 2.5bp wider as IL Gilts get a boost from solid 2048
IL syndication. While 2-yr swaps spreads are leading the widening move at +3bp.
EGB SUMMARY: EGBs started slow but momentum began to build. The first move was
seen in the 7Y+ sector of the Italian curve and indeed, the Italian market has
been well bid all morning. The 10Y Bund-BTP spread is at its narrowest for a
year at 140bp, a 5bp move today.
- The limited supply on offer today was easily digested. Austrian nominals,
German and UK linkers and the last EFSF syndication of the year demonstrated an
elevated level of demand out there. Bunds leapt higher as these good
auction/syndication results filtered through. The RXZ7 contract surpassed
yesterday's high and topped out at 163.28.
- German debt is also outperforming the swap curve quite smartly today, with the
RX invoice spread 0.8bp wider at 50.1bp.
- Data has been limited: Eurozone Sep retail sales were slightly firmer than
expected but this release is not considered to be a reliable monthly indicator.
That said, the trend in retail sales has been sharply higher since 2014.
- On Bloomberg TV, the ECB's Lautenschaeger said the "I'm very confident that
the inflation rate will pick up".
--MNI New York Bureau; tel: +1 212-669-6432; email: firstname.lastname@example.org