ASIA/US/EUROPE BOND & STOCK RECAP: TSYS HIGHER, BUNDS GAIN TOO

     US TSYS SUMMARY: US Treasuries open NY higher, yield curves mixed (5/30Y

steeper) after overnight two-way flows mainly tilted toward Tsys Bid.

- TOKYO: Tsys opened/held steady/mildly mixed for first few hours; about 9pm ET

Tues, Tsys bottomed out and then crept higher ever since, bid as US$ slipped

into London hours. Flow included macro acct buying in belly to long end

w/Japanese insurance portfolios in 10s and 30s. Tsys aided by softer Asian

stocks; NIkkei ends off 2%. 

- LONDON: Softer stocks aid EGBS, Tsys. Weaker US$/yen also aids Tsys. Tsys saw

light sales in 5Y, 7Y, 10Y. 

- US Pres. Trump expected to back Jerusalem as Israel's capital later today;

some warn of Palestinian "3 days of rage" if that occurs; Bloomberg noted that

the wording of Trump announcement will be important (i.e., does he say ALL of

Jerusalem would be Israel capital?) 

- US SWAPS: Spreads steady/mixed. 

- US EURODLR FUTURES: Firmer, at/near overnight highs; LIBOR rise pace slowed. 

- OVERNIGHT REPO: Current 10-year note remains very hot, still -3.00%; bid won't

let up until at least Nov. 15th, as MNI said last night, as it's due to usual

pre-auction shorts but also as shorts/bears fixate on current 10Y note.

EGB SUMMARY: Risk-off flows, Brexit uncertainty and soft US unit labor costs all

helped push German Bunds higher and yield curve flatter Wednesday. German 10-yr

Bund is looking to close 2.3bp lower at 0.297% after hitting lowest level since

Jun 27. German 2s/30s is 0.8bp flatter 

- Bunds rallied from session lows to intra-day high in European afternoon trade,

supported by concerns over agreement on Brexit talks moving onto the next stage,

US unit labor costs falling 0.2% in Q3 and general risk-off flows. 

- EMU periphery extended widening move versus German Bund, led by the +3bp move

in Bund/Bonos 10-yr spread. Semi-core are also marginally wider vs German Bund.

Weakens could be linked to slightly hawkish comments from ECB Mersch who warned

of risk if the ECB's asset purchase programme remained in place for too long and

expressed confidence that the apparent decoupling between growth and inflation

won't persist and inflation will, therefore, pick up. 

- Late on there was a Bund/BTP future spread that was blocked and appeared to

look for BTP/Bund spread to narrow. 

- Tomorrow Spain & France look to sell up to E9bln in Bonos and OATs.

GILT SUMMARY: Gilts are trading modestly higher ahead of NY open, with the

exception of the short-end of the curve which is little changed, however prices

are close to session lows, ignoring fall in sterling on the back of an agreement

on the Irish boarder issue being unlikely to be agreed this week

- With lack of UK and Eurozone data, markets have been on Brexit headline

watch,reacting to any comments being made by EU, UK, Ireland or DUP officials

and trying to gauge if there will likely be 'sufficient progress' in Brexit

talks for the EU to allow them to move onto the next stage. 

- The latest from newswires is that PM May talked to DUP leader Foster on the

phone, but this only resulted in the comment that NI party dos not see a deal

this week. Spokesman for PM May though said that progress on moving to phase 2

has been made and the May is working towards Dec 14 Euro summit. 

- Breakevens are little changed despite fall in Sterling, while swap spreads are

mixed with 2Y to 7Y slightly tighter while 10Y and above are 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$]