ASIA/US/EUROPE BOND & STK RECAP: TSYS LOWER IN QUIET 2WAY FLOW

     US TSYS SUMMARY: Treasuries open NY weaker after overnight range, 2way

flow. 10Y 2.392% vs. 2.396% recent high yld. Data: 8:30am Oct trade bale, 9:45am

ET Nov Markit Services Index, 10am ET Nov Non-Mfrg ISM & Dec IBD/TIPP Optimism

Index, QCEW Emp. 

- TOKYO: Tsys saw brief early bid, then drifted lower. Buying by pension funds

and Japanese lifers. But Asian real$ sold intermeds amid firm US$/yen. Nikkei

stk index -0.5% 

- LONDON: Tsys rise off day's low starting 2am ET amid better buying in 2Y, 5Y,

10Y notes and credit-tied buying in 5Y, 10Ys; offset by sales in 10Y notes; 

- US SWAPS; Steady/mildly tighter in wings; flatteners in 5/7Y, 5/10Y, 10/30Y. 

- EURODLR FUTURES: Steady, mixed; short-end sales as US$ LIBOR set higher. 

- TAXES: Sen/House tax bill reconciliation starts: Hse Ways & Means Comm Kevin

Brady to be reconciliation conf chairman. 

- US HIGH-GRADE CORP ISSUANCE: Today: BNG $750M 3Y sust., Prov of New Brunswick

$500M global 5Y note, likely others.

GILT SUMMARY: UK Gilts are trading modestly higher, led by the long-end as time

ticks away for UK and EU to agree 'sufficient progress' on Brexit ahead of EU

leader Summit next week and UK service PMI slips more than expected. 

- UK 10-yr Gilt yield is -1.3bp at 1.271%.

- Gilts opened marginally lower but very quickly reversed losses and crept

higher as markets digested ramifications of NI's DUP scuppering possible Brexit

agreement yesterday on Irish border concerns. Pressure was seen falling onto PM

May to try and get the DUP on side before the EU leaders summit on Dec 14. 

- Gilt future then spiked to intraday high in reaction to UK service PMI

dropping more than expected to 53.8 in Nov from 55.6 in Oct. However faded gains

as the report showed prices charged rising at fastest pace since Feb 2008. 

- The 5-yr Gilt re-opening auction was slightly disappointing as despite rise in

yield, demand dropped and the tail widened, which temporarily weighed on Gilts. 

- 5-yr and 10-yr breakevens are 2.6bp and 2.2bp wider respectively, while swaps

spread are marginally wider led by the 1.1bp move higher in the 2-yr.

EGB SUMMARY: There has been a pretty solid, if unexceptional, bid to the EGB

markets this morning. In Germany, yields have declined fairly uniformly across

the curve although the 2-3Y area ran into some real money selling earlier in the

session. The Bund contract is in the middle of the daily bull channel that has

been evident since late October. 

- Peripheral EGB markets have struggled to keep pace. Almost as soon as the

Italian 10Y yield hit the 2017 low of 1.70%, the BTP market began to

underperform the core. 

- Eurozone Nov final PMI data printed in line with the flash estimate of 57.5

for the composite and 56.2 for the service sector. Eurozone retail sales sank

below expectations in October at 0.4%Y/Y although this indicator is unstable. 

- Flows have mostly involved heavy roll activity with only around 48 hours

remaining for the Dec-17 contract. 

- Austria announced that it would cancel its final auction of the year,

scheduled for Dec 12. This had been half-expected and failed to have a material

impact upon RAGB yields/spreads.

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

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