ASIA/US/EUROPE BOND & STK RECAP: TSYS BEGAN NY WEAKER, STEEPER

     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.

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

lower. 

- 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".

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

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

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