ASIA/US/EUROPE BOND & STOCK RECAP: TSYS LOWER IN 2-WAY FLOWS

     US TSYS SUMMARY: Treasuries open NY lower, after overnight two-way flows

including Asian safe-haven bid amid another N.Korea ICBM missile firing. 

- TOKYO: Tsys gained in early overnight as N. Korea tension spurred light risk

off buys; US flew two jets in Korea area in response to N.Korea missile. Bank

asset mgrs bought 5s and 10s, misc Japanese accts bought 10s, fast$ and bank

portfolios sold near highs. 

- LONDON: Tsys ebbed, German Bund decline on higher than expected German retail

sales, surprise Eurozone core inflation rise. Also selling in Tsy TYU futures,

while real$ and bank portfolio accts did 2-way 10Y flows. Real$ sold long end

Tsys. 

- MONTH-END: Bloomberg Barclays US Tsys index 0.06 yrs for month-end advance

estimate. Today is settlement for recent 2y, 5Y, 7Y, 2Y FRN auctions of last

week. And some cited need to sell US stocks mildly/vs. buy bonds mildly into

month-end. 

- US SWAPS: Spreads wider, curve flatter, deal-tied hedging. US EURODLR FUTURES:

Mildly lower. 

- HIGH-GRADE CORP. BOND: Looks like busy Monday: KT Corp 5Y (+92.5/97.5) via

BNP/C/CA/JPM/NOM, Banco Gnrl 10Y (+200s mid/low), BAML/JPM, and Ford Motor

Credit 5Y Baa2/BBB/BBB (+130/135)/FRN (L-Eqv) via C/DB/GS/JPM/MS/RBS/SG; also 

Intl Paper Baa2/BBB 3Y/NC1 FRN (3ml+65s) and Long 30Y (+160s) via BAML/SMBC

NIKKO; and Boston Gas A3/A- 10Y +110s via DB/GS/JPM/LLOYDS, and DTE Electric

Aa3/A $440M 30Y general mortgage bond via BAML/BARC/WFS. Tues: ADB $500M 5Y/10Y.

     EGB FLOWS: Traders note large Bund future block going through screens:

4,697 RXU7 @ 161.82 at 1311:18 BST (8:11am ET); price action would suggest it

was sold.

EGB SUMMARY: The German Sep Bund future contract opened higher, but quickly gave

up those gains as German retail sales rose higher than expected, screen selling

in 10-yr US Tsy call options and after surprise rise in Eurozone core inflation.

German 10-year yield is 0.7bp higher at 0.550%, curve touch steeper. 

- EMU Periphery are trading strongly though, with Portugal 10-year spread 4bp

tighter, while Spain front-end and the long-end of the Italian curve are the

stand out performers so far Monday. Support seen due to large cash flows from

both Spain and Italy today and tomorrow, totalling E51.3bln in redemption and

coupon payments. 

- Eurozone flash core inflation for July surprised the market by rising to 1.2%

y/y from 1.1% in June. However overall CPI remained unchanged at 1.3% y/y. 

- It is also month-end today with Barclays projecting a large 0.12yr increase

for the eurozone, which should be seen supporting bid in EGBs as well. 

- No Eurozone supply today, but Germany will start things off on Tuesday before

a raft of issuance on Thursday from Spain and France.

GILT SUMMARY: Gilts are trading modestly higher, yield curve flattening as the

long-end outperforms despite surprise rise in Eurozone flash core CPI, as

geo-political concerns tick higher and large month-end extension underpin

demand. - 2-yr Gilt yield is -0.8bp at 0.240%, 5-yr -0.5bp at 0.567%, 10-yr

-0.9bp at 1.208% and 30-yr -1.5bp at 1.841% according to Tradeweb 

- Gilts opened higher following geo-political concerns between Russia & US and

US/Japan and N.Korea. Further signs of division within UK government on Brexit

also added to political tension ahead of BoE MPC meeting on Thursday. 

- Gilts reversed gains following large sell of 10-yr US Tsy option calls, but

quickly recovered after newswire report from Japan of possible N.Korea getting

ready for another missile test. Month end bid also seen underpinning move. 

- Gilts squeezed even higher in wake of BoE lending data that showed slight drop

in the number of mortgages approved and fall in net consumer credit, and despite

drop in Gilt purchases by foreign investors. 

- Swap spreads are slightly wider and breakevens are touch higher, but vol

light.

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

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