ASIA/US/EUROPE BOND/STK RECAP: TSYS WEAK,FLATTER INTO FRI JOBS

     US TSYS SUMMARY: Treasuries open NY weaker, flatter in pre-jobs-day Thu

trade that may see NY/East Coast traders leave early amid snowstorm, esp. given

mkt in waiting mode for Fri 8:30am ET Dec jobs. Tsys drifted lower amid as Dec

ADP private payrolls report came out up 250K, 10Y yield at 2.471%. 

- TOKYO: Financial mkts resumed trading after holidays, leaving Jpn Nikkei stk

index ending u+3.3%, catchup to firmer global stock markets. Tsys drew bank and

pension fund buying in 2Y-5Ys and 30Ys, Asian real$ bought 10Y notes. 

- LONDON: Tsys followed core EGBS lower amid French, Spanish supply pressures.

Bank portfolios bought 10Ys, while props earlier bought steepeners, then ongoing

sales in intermediates. Modest buying in long end. 

- US SWAPS: Mildly tighter amid Wed swappable issuance return; 4Y rate payers,

5Y bank receivers, 5/6/9Y and 5/6/10Y, 5/6/30Y fly paying belly; 4/5Y steeper. 

- US EURODLR FUTURES: Brisk sales in EDH8 (49K sold at 98.19). 

- OVERNIGHT REPO: Tsy 3Y, 10Y notes tight into Thu 11am ET announcement on next

wk 3/10/30Y auctions. 

- STOCKS: Most European stock indexes up 1%+; US stock index futures also

higher.

EGB SUMMARY: The EGB market was quite sentiment-driven in this early part of the

year. Bunds ran into early selling but recovered through the European morning.

There was a small setback around the time of a poorly bid French auction but the

large market decline was reserved for the US ADP data. - News of a 250k ADP

knocked around 18 cents from the price of the Bund contract but within the hour

EGBs had shaken off the impact. 

- Debates are raging over the value of peripheral and particularly Italian debt.

BTPs saw strong buying from domestic investors in the 5-10Y section of the

curve. The Spanish market was held back by mid-morning auctions but the Spanish

affair went smoothly, helped by strong bidding for the 5Y part of the curve. The

5-8Y section of the Spanish curve is where roll and carry is maximised. 

- Germany announced it would sell 0.5bln of 30Y Bund linkers on Jan 8. 

- Slovenia sold E1.5bln of 10Y notes via syndication and in the agency market,

BNG sold E0.5bln, also of 10Y paper. 

- The Bund yield finished Thursday +0.3bp at 0.445%. Bund-GGB fell 14.5bp, and

PGBs, Bonos and BTPs tightened their 10Y spreads to Germany by 6-8bp.

GILT SUMMARY: A combination of risk-on sentiment flows, continued mantra of

gradual rate hikes from the FOMC and better than expected UK service PMI has led

Gilts to sell-off sharply especially in the 2-yr to 10-yr area bear flattening

the curve. 

- 2-yr Gilt yield is +3.4bp at 0.502%, 5-yr +3.0bp at 0.765%, 10-yr +3.2bp at

1.245%, 30-yr +2.1bp at 1.789% and 50-yr +1.7bp at 1.591%. 

- Gilts were lower from the get-go, weighed by risk-on flows overnight as Asian

stocks rallied and oil continued to tick higher. While FOMC meeting minutes

showed Fed was still on a path of gradual rate hikes. 

- March Gilt future then spiked to session low of 124.50, probably on the back

of a sell block in G H8 at 124.55 for 1.5k, before recovering by 15 ticks. 

- There was further selling in wake of higher than expected rise in UK service

PMI to 54.2 in Dec from 53.8 in Nov. Overall, the PMI data pointed to a marginal

uptick in the economy with avg composite PMI for Q4 above Q3. 

- Breakevens are between 1.3-2.6bp wider led by the 5-yr, while swap spreads are

mixed with 2-yr 1.9bp tighter and 15-yr and above modestly wider.

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

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