ASIA/US/EUROPE BOND & STOCK RECAP:TSYS BEGIN NY HIGHER/FLATTER

     US TSYS SUMMARY: Treasuries prices open NY higher, flatter after overnight

range, then dip until 3:30am ET, when 10Y note hit key 2.50% then a slow rise as

bargain-hunting buying showed. That followed recent 3-day Tsys selloff. 

- TOKYO: Tsys began steady/mildly bid with mild gains into UK. Mkt supported by

Asian real money buying in 10Y notes/longer issues, while bank buying arose in

30Y bonds; others did 5/30Y Tsy cash flatteners. Nikkei stock index receded amid

global stocks profit-taking on earlier buying spurred by US tax bill approval in

Congress. Yen weak as BOJ kept rates and mon policy steady. 

- LONDON: Tsys 10Y hit 2.479% session low yield at 1:58am ET, then ylds moved

upward until 10Y hit 2.50% at 3:30am ET. Tsys followed core EGBS lower, then

improved off the lows with German Bunds. Flows had prop, real$ buying in 10Y,

30Y after fast$ selling in intermediates. European stocks mixed; US stock index

futures firmer. 

- US SWAPS: Modestly wider across curve. 

- OVERNIGHT REPO: Tsy 2Y, 5Y tighten into next week's 2/5/7Y auctions. 

- US HIGH-GRADE CORPORATE BONDS: Nothing expected; busy Jan. though.

EGB SUMMARY: Bunds hit fresh session lows in European afternoon trade at 161.50

around 10:45am ET, and look to close near this level, weighed by higher than

expected Eurozone Consumer Confidence. German 10Y Bund yield is 2.3bp higher at

0.427% with curve bear flattening as short-end underperforms. The 2s30s spread

is 1.4bp tighter. - The Euro-Area Consumer Confidence data for December came in

slightly better than expected at 0.5 with the Bloomberg Median survey at 0.2.

this number is the highest level since June 2000. 

- Earlier, the Mar-18 10Y Bund contract managed to recover all of the early

morning losses before giving back these gains again as as NY opened to print

fresh intra-day lows. 

- Markets will be awaiting the results of the Catalan regional elections after

polls are set to close at 8pm local time (7pm GMT). According to the data

provided on the regional government website the election turnout is around

34.69%. The Bund-Bonos spread has marginally tightened by 1.6bp at 105.4bp, but

has actually underperformed the rest of the peripheral market with Bund-BTP

spread 3bp tighter at 150.0bp.

GILT SUMMARY: Gilts are trading lower led by the 5-yr to 10-yr part of the yield

curve, but nowhere near as bad as the last few days, as market wind down ahead

of long Christmas weekend holiday and then month/quarter/year end next week. 

- Asian overnight news was limited to the BoJ leaving policy and yield curve

control target unchanged. While on the domestic political front, there was more

bad news for PM May as her most senior member of the Cabinet and most trusted

ally was forced to resign. 

- Gilts still opened marginally lower though, as markets likely continued to

feel slightly upbeat on Brexit following BoE carney's comments on foreign bank

regulation that is seen as making it easier for them to remain in the City. 

- UK public sector borrowing for November ticked higher versus October as

expected, however, year-to-date net borrowing was the lowest since 2007

supported by rise in VAT receipts. 

- Swap spreads are touch wider expect for 2Y, while breakevens are circa +1.5bp

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

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