ASIA/US/EUROPE BOND & STK RECAP:US TSYS LOWER THEN RISE ON GDP

     US TSYS SUMMARY: Update: Tsys rose on less than expected 2.6% 2Q GDP; cash

10-year note is at 2.316% vs. 2.337% high yield seen at 7:50am ET.

     US TSYS SUMMARY: Treasuries opened NY lower across the curve with the US

intermediates now leading lower esp. 5Y note amid 5/30Y curve flattening; 10Y

yield is now at 2.325% at 8:29am ET, vs. 2.309% at 3pm ET Thursday. Traders

await 8:30am ET US Q2 GDP report; MNI poll median estimate is for 2.7% gain. 

- TOKYO: Sources reports early buying in US Treasuries, but it then fell quiet

despite Asian stocks ticking lower. Jpn core CPI up 0.4% in June, due to energy,

durables. In US, the GOP "skinny" pared-down Obamacare healthcare repeal act

defeated in Senate. 

- LONDON: Treasuries declined on higher flash German inflation data, upbeat

Spain Q2 GDP. Tsys ebbed lower since about 3am ET. European stocks indexes

weaker. Tsys recently saw some dip buying after overnight decline; and 5/30Y and

2/30Y curve flattening, but 2/5Y, 2/7Y steepening. US stock index futures lower

on soft tech stocks; but Amazon shares lower while Intel higher. 

- US CORPS: No deals. O/N RP: 5Y Tsy note well bid, 2Y note light bid. 

- US EURODLRS: Steady/slightly lower. US SWAPS: Little changed to mildly wider.

EGB SUMMARY: European debt suffered considerable pain this morning and the pain

was spread fairly uniformly around. The big trade was duration and curve rather

than spreads. Futures activity was dominant but there have been surprisingly few

blocks. - The 10Y Bund contract is down 72 ticks at 161.51 and nearly all of the

move can initially be blamed upon the Germany State CPI releases that

corresponded to a 0.1% upward surprise in the national HICP reading. 

- The 10Y Bund yield is 4bp higher at 0.577%, but still 4bp below the 19 month

peak of 0.619%. 

- Some bargain hunting has been seen in the past half an hour but the market is

nervous. This is not a risk-related trade as equity markets are also down quite

heavily. The CAC is leading the charge lower with a 1.6% decline.

- The curve bear steepened from the 30Y and there was no strong change in the

concavity of the yield curve; no underperformance of the 5Y or anything fancy. 

- Italy sold a new 5Y alongside 10s and CCTs. These are weighing on Italian debt

slightly more so that the Bund-BTP spread is 2bp wider at 158bp.

GILT SUMMARY: Gilts are feeling the weight of higher than expected German State

flash inflation and are trading lower across the curve, with 5-yr and 10-yr seen

leading the underperformance.

- UK 10-year yield was up 1.5 bps to 1.215% at 8:42am ET.

- Gilts future actually opened a few ticks higher as GfK consumer confidence

dropped to match post-referendum low of -12 as consumers feel the pinch of

higher inflation and a deteriorating economic outlook. 

- Futures then reversed gains and dropped lower, taking cue from sharp sell-off

in Bunds in wake of higher than expected German state CPI and after digesting

Chancellor Hammond comments on Brexit transition. Further selling then noted

before pan-German CPI was released, but then market witnessed short covering. 

- Hammond said there was "broad acceptance" in government to strike a transition

deal to avoid a "cliff edge" scenario and should last maximum of 3-years. - Swap

spreads are mixed, short-end marginally tighter, but little changed, while

breakevens are 0.4-0.8bp 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$]