ASIA/US/EUROPE BOND & STOCK RECAP:TSYS LOWER THEN RISE ON DATA

     US TSYS SUMMARY/UPDATE: Treasuries began Thursday lower but then rose on

buying amid higher initial weekly jobless claims and lower July yr/yr core PCE

price index (as lowest yr/yr since Dec. 2015). 

US TSYS SUMMARY: US Treasuries prices open NY lower, mildly flatter after

overnight rangebound trade as traders mark time into Friday's key August nonfarm

payroll employment report. Lots of econ data today: 8:30am ET July US personal

income/PCE, initial weekly jobless claims and 9:am ET Aug ISM Milwaukee and 9:45

MNI Chicago PMI and BBG Consumer comfort index and finally, 10am ET NAR pending

home sales; no Fed speakers scheduled. 

- TOKYO: Treasuries saw early bid wane quickly, amid selling by Asian regional

banks due to firmer China PMIs; 5/30Y flatteners done too. Japan's Nikkei stock

index closed up 0.72% but China CSE 300 closed off 0.32% and HKG's Hang Seng

closed of 0.44%.

- LONDON: Treasuries saw specs two-way int 2Y to 5Y notes, fast money selling 5Y

and credit-tied buying on the lows. Misc acct buying arose in 5Y through 10Y

notes. EGBs not react to economic data but improved on Reuters ECB sources story

that stated obvious point that euro appreciation will influence the QE decision.

- US SWAPS: Mildly wider across curve. 

- US EURODLR FUTURES: Mildly lower in Whites-Reds (Sep'17-Jun19). 

- OVERNIGHT REPO: Tsys 2Y, 3Y, 5Y, 10Y specials cool: today is 2/5/7Y auction

settlement.

EGB SUMMARY: European fixed income markets have been bombarded by economic data

this morning and almost no matter what the release was, EGBs showed no reaction.

Instead, a Reuters story that stated the obvious point that the appreciation of

the euro will influence the QE decision produced the greatest debt market

response -- a 0.5bp decline in yield. - Relative to yesterday's close the 10Y

Bund yield is 0.5bp higher today, with a very slight German curve steepening. 

- Peripheral debt benefited strongly from the Reuters article that suggested the

QE exit might be delayed. Portuguese debt is also being assisted by stronger

than expected GDP data and leads spread contraction to Germany with a 4.6bp

tightening. The Bund-BTP spread is close behind with 3.4bp narrowing to 168.7bp.

- Eurozone CPI data rose above the screen consensus to 1.5% in August from 1.3%,

although the core matched the consensus and July's print of 1.2%. Some of the

expectations beat was anticipated owing to yesterday's strong German CPI data.

GILT SUMMARY: Gilts have reversed opening losses and are currently marginally

higher, led by the short-end of the curve, as comments from BoE MPC member

Michael Saunders are less hawkish than expected. 

- Gilt 10-year yield is at 1.033%, yield up 0.5 bps.  

- Gilts opened modestly lower weighed by modest easing in US Treasuries

overnight and tick higher in UK GfK consumer confidence. Gilts pared losses

however, as markets interpreted BoE Saunder's comments as less hawkish than

previous -- Backs modest rate rise to get to inflation goal, but risk Brexit

path is bumpy and weighs on confidence. 

- Gilts eventually reversed gains and broke into positive territory as markets

digested DMO announcement of Q3 Gilt issuance which showed a lack of ultra-long

Gilt supply. 

- Swap spreads are mixed with 2-yr +1.2bp & 7-yr -2bp. Breakevens are unchanged

- Markets also await press briefing on 3rd round of Brexit talks.

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

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