ASIA/US/EUROPE BOND & STK RECAP: TSYS STEADY;2WAY O/NIGHT FLOW

     US TSYS SUMMARY: US Treasuries prices open NY near unchanged after

overnight mixed flows and safe-haven bid tied to N.Korea situation; mkt peaked

about 7:08am ET (2.231% 10-year note yield), then some profit-taking and light

sales occurred. Global stocks mildly weaker. Tsy sells $15B 30Y bond auction

(new); NY Fed Pres Dudley speaks 10am ET. 

- TOKYO: Ongoing worries on N.Korea: South Korea, Japan said will defend US if

Guam attacked; N.Korea said will eye attack toward Guam waters by mid-August.

Tsys saw flight-to-quality buying from Asian accts, Jpn bk buying in 3Y notes,

insurance portfolio and credit-tied buying in front end. Friday will be Japanese

market holidays; next week has the Obon market holidays. 

- LONDON: Tsys inched off low, choppy trade, light volume. Foreign central bank

and misc acct buying in 5Ys, while end-users two-way on net after earlier sales.

- US SWAPS: Steady/mixed, while spread curve mildly flatter. 

- EURODLR FUTURES: Also steady/mixed. 

- O/N REPO: Tsy 2Y remains the tightest, but mild bid in 10Y note. 

- US$ HIGH-GRADE CORPORATES: No firmly scheduled issuance (yet). 

- COMMODITIES: Silver up 1.67% on day, gold up 0.67%, crude oil +0.67%.

EGB SUMMARY: There was a dip in the German Bund contract at the open but it has

picked up and is on the steady rise. 

- Buying flows developed quickly in the front month Euribor contract that saw

27k purchased. The buying did meet some sellers in the euribors but the risk-off

trade quickly developed as the equity markets turned south. 

- On the data front French Industrial production number came in on the soft side

of consensus at 2.6% Y/Y from a revised 3.1% 

- Italian and Spanish bonds are all well bid today, recovering from some

underperformance yesterday. We heard that mutual funds were active sellers

yesterday and that they are in no hurry to buy yet. There is also some BTP

10-30Y flattener trade interest, which we heard from three separate sources. 

- At present, French debt is underperforming but the flows are said to be very

thin today. 

- The 10Y Bund yield was 0.4bp lower today at 0.425%. The important Bund level

is 163.99 (yesterday's and a 6 week high).

GILT SUMMARY: Gilts opened lower as it appeared that the risk-off trade was

reversing in the Asian trading session. The contract quickly fell to a low of

127.21 before buyers appeared and quickly rose to 127.45. There is virtually no

net yield change for the 10-Year Gilt benchmark. 

- Economic data included a decline in a RICS July house price index to +1, the

lowest since 2013 and down from +7 in the prior month. 

- Manufacturing output data for June were close to consensus at 0.6%Y/Y,

although the IP data came in light of the consensus. The data had little impact

upon the Gilt market. 

- Volumes have been exceptionally thin but for a small flurry of trading at the

open and a small buyer in the 127.30 area as the market reacted to the opening

of equity markets. 

- The FTSE is down 1.14%, easily the worst performing major equity market.

However, 15 companies start trading ex-div today and this has taken around 41

pts off the index.

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

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