ASIA/US/EUROPE BOND & STK RECAP: TSYS LOWER;O/NIGHT 2WAY FLOWS

     US TSYS SUMMARY: Treasuries open NY weaker after overnight two-way flows

followed US post-FOMC rally. Tsy 1pm ET $28B 7Y auction. 10Y Tsy yld 2.3bp

higher at 2.305%; 2/10Y curve steeper, 5/30Y flatter by 0.60 bps. 

- In TOKYO, Tsys saw initial buying in 2Y, 5Y by Asian central banks, real money

accounts, credit funds. Sources then cited large curve flattener via screens:

-13k FVU7 blocked at 118-04.25 vs +3k USU7 blocked at 153-09; others eyed cash

5/30Y flattener too. There was credit-tied selling in Tsys. JGBS end higher. 

- In LONDON, Treasuries traded muted/slightly lower while EGBs and Gilts caught

up to Tsys. Tsys then slid to day's low on 10-yr Ultra futures block seller:

3,012 UXYU7 at 135-01+, then recovered on block buys in 5-yr and 10-yr futures:

3.35k FVU7 at 118-02.75 and 4.3k TYU7 at 125-27+. Bunds large block buy nr

162.29 resistance, peaked at 162.50. Data include wkly jobless claims and

durable goods. 

- US CORPS: Today: AT&T US$ benchmark 5Y Fxd/FRN, 7Y, 10Y, 20Y, 32Y, 41Y coming;

up to $12B size; BNZ Intl Funding bd, Amex 5Y;

- O/N RP: Tsy 5Y tight; 2Y ebbs.

GILT SUMMARY: Gilts are trading higher helped by FOMC statement last night, but

are off session highest levels due to upbeat trade survey from UK retailers. 

- The belly of the yield curve is outperforming with 5-yr gilt 3bp lower at

0.55%, while 10-yr is 2.6bp lower at 1.201% according to Tradeweb. 

- Gilts opened higher thanks to a dovishly interpreted FOMC statement overnight

that seamed in no hurry to raise rates again, and would probably announce

balance sheet reduction in September. 

- Gilts slipped from session highs however as latest CBI Distributive trades

survey found retailers reporting net sales balance at +22 up from +12 in June

and were optimistic for strong growth in August as well. 

- Elsewhere, the press are highlighting possible delays in Brexit talks, with

Home Secretary Amber Rudd announcing a "detailed assessment" on the economic

impact of EU and EEA migration, which could take over a year to complete. While

the EU has warned that talks could be delayed by 2-months because of UK's

refusal to engage with Brussels over the Brexit bill. 

- Swap spreads are between 1bp and 2bp wider, while breakevens are 2-3bp tighter

EGB SUMMARY: Bunds opened up strongly to follow the Treasury market rally in the

overnight session but then built quickly upon those gains as a Bund block

purchase came at an important resistance level of 162.29. Stop-losses then

propelled the contract to peak at 162.50. 

- The yield curve has flattened by 3bp between 2 and 10Y and the 10Y Bund yield

has fallen 3.6bp on Thursday to 0.527%.

- All of the movement in yield has been in the real yield space despite the fact

that the euro appreciated strongly versus the dollar following the releases of

the FOMC minutes. 

- Peripheral debt markets are largely keeping pace with developments in the

core. At one stage, the Bund-Bonos spread widened to above 100bp but is back

below at 98.7bp. Also, the BTP market has outperformed the core slightly. -

Economic data saw Eurozone M3 rise 5.0% Y/Y as expected and even the details

were largely unexciting. 

- Ahead of a heavy US earnings calendar, the European earnings calendar was

frenetic but has left stockmarkets mixed.

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

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