ASIA/US/EUROPE BOND & STOCK RECAP: TSYS BID ON N.KOREA WORRIES

     US TSYS SUMMARY: Treasuries opened NY higher, flatter after overnight

safe-haven buying as North Korea warns it may do hydrogen bomb test over Pacific

Ocean (WSJ.) No early data but 9:45am ET Sep Market Mfrg PMI & Services PMI,

10am ET Alt. Fed inflation, 11am StL Fed real GDP Nowcast, 11:15am NY Fed GDP

Nowcast. 

- TOKYO: Good Tsy buying on N.Korea react to US Pres. Trump tighter sanctions;

China, others help US aims. Lg end rose most; traders cite buying in 10Y Tsy

futures, 7Y cash. Jpn accts bought 5Y, 10Y; Asian bks buy 10Ys; mild sellers at

high; Asian central bks buy dip. 

- LONDON: Tsys still higher on pre-weekend N.Korea fear. Fast$, real$ bought 5Y,

10Y, while bank portfl buyng in 3Ys; insur portfl buying 30Ys. Macro fund

selling in 5Ys. Gold, yen up. SF Fed Williams expects continued gradual rate

hikes, poss Dec. move. KC Fed George 9:30am ET, then Dallas Fed Kaplan 1:30pm. 

- US SWAPS: Spds mostly tighter; 2way flow; recent rate paying in 2Y, 3Y. 

- OVERNIGHT REPO: 2Y, 5Y, 7Y tighten: pre-auction shorts into next wk's 2/5/7Y

auctions; 10Y Tsys tight; GSE cash shd exit RP mkt Fri, leave Tsys looser.

GILT SUMMARY: The markets waited all day for PM May's Brexit speech and in the

end it was rather disappointing and thin on details, with only the confirmation

the UK is looking for a 2-yr transition deal to smooth the exit process and

guaranteeing EU citizen rights post Brexit. 

- Whether this will be enough to meet the demands of the EU in order to progress

talks is unclear with markets seen waiting for a reaction from Michel Barnier. 

- Gilts initial spiked to session high following announcement that the UK would

like a "strong dispute resolution mechanism on trade differences" and doesn't

want "ECJ as arbiter". However, quickly pared gains and eventually slipped below

the level seen before start of May's speech, but hold onto marginal gains as May

said UK would honour commitments made in period of our membership. While

Sterling spiked lower vs US Dollar, but has managed to regained majority of

losses by London close. 

- 2-yr Gilt yield is -0.2bp at 0.449%, 5-yr -0.4bp at 0.772%, 10-yr -0.7bp at

1.363% and 30-yr -0.3bp at 1.932% according to Tradeweb. 

- Swaps spreads are marginally tighter while breakevens are 0.5bp to 1.5bp wider

EGB SUMMARY: As the EGB market was heading into the Europe close the German Bund

curve had made almost no net movement. This hid a few swings in the market, with

the market opening strongly as North Korea threatened a nuclear blast and then a

decline under the battering of strong PMI data for September. 

- BTPs and other peripheral markets started well but the 10Y Bund-BTP spread

tended to go in the opposite direction to German yields, so when core yields

started declining the Bund markets underperformed. - We heard of cash selling of

BTPs against 10Y Bunds around the middle of the session. 

- The Greek market briefly came alive as news hit screens that Greece would exit

excessive deficit procedures. This was worth around 2bp on the 10Y GGB. 

- UK PM Theresa May's keynote speech in Florence gave an initial push higher to

Gilts and spilled over onto stronger Bunds. 

- The truth be told that European levels, curves and spreads were incredibly

similar on Friday evening to what was seen on Thursday.

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

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