ASIA/US/EUROPE BOND & STOCK RECAP: TSYS OPEN LOWER THEN CHOPPY

     US TSYS SUMMARY/UPDATE: Tsys receded amid strong +237,000 August ADP

private payrolls, 3.0% 2Q GDP revision. But Pres. Trump tweet on N.Korea brought

in some dip buying. 

     US TSYS SUMMARY: US Treasuries open NY lower, with 2/30Y and 5/30Y flatter

after overnight consolidation followed Tuesday safe-haven bid gains tied to

N.Korea firing of missile over Japan. Risk-on mood means European equities

firmer, as are US stock index futures. All await 8:15am ET ADP and 8:30am ET 2Q

GDP. 

- TOKYO: Tsys had brief bid early which evaporated, then consolidation after Tue

gains as US/N. Korea tensions moderated. Sources reported asset manager and

Asian regional bank selling in the intermediates 

- LONDON: Tsys cut losses, peaking about 5am ET, holding range, then drifting

starting about 7am ET. Tsys saw two-way flows from bank portfolios in the short

end, with prop and fast$ buying in intermediats. Sep/Dec futures roll volume

moderates into Thurs first notice. EGBs recently pressured after slightly higher

than expected German CPI. 

- US SWAPS: Wider. 

- US TSYS RP: Tsy 2Y, 5Y, 10Y notes all trade tighter. 

- US CORP HIGH-GRADE ISSUANCE: Kommunalbanken $1.0B 2Y and Svenska Handelsbanken

3Y/FRN today, JFM Thurs.

GILT SUMMARY: UK Gilts are modestly lower, yield curve steeper, having pared

back some of their risk-on move seen Tuesday as the geo-political tensions over

North Korea's missile test eases for now. While Euro/Sterling has slipped

comfortably back below 0.9245, but is relatively steady vs the US Dollar. - 2-yr

Gilt yield is +1.7bp at 0.178%, 5-yr 1.6bp at 0.437%, 10-yr +2.4bp at 1.02% and

30-yr +2.9bp at 1.69% according to Tradeweb. 

- Gilts opened sharply lower seen weighed by fall in rhetoric over latest

missile test by N.Korea and fade in risk-on sentiment. While easing in UK high

street deflation in August, with non-food deflation at its shallowest since

April 2013, also seen weighing on Gilts. 

- There was no reaction to BoE lending data that showed a higher than expected

increase in mortgage approvals but a slow downed in unsecured credit in July. 

- However Gilts squeezed to fresh session high of 127.51, as newswires reported

UK PM May reiterating that "no Brexit deal is better than a bad deal 

- UK swap spreads are marginally tighter with the exception of the 15-yr which

is 3.5bp tighter, while UK breakevens are around 0.7bp wider across the board.

EGB SUMMARY: The Bund contract started lower and had a look at closing the gap

at 164.98 but did not manage to do so. About an hour into European trading, the

Bund recovery began. 

- The upward Bund move began despite some robust data. German State and Spanish

CPI data were approximately in line with consensus but Eurozone economic

sentiment data easily beat expectations, and achieved a 10 year peak of 111.9. -

Despite the recovery of the Bund contract, the 10Y Bund yield is still 1bp

higher than the European close from yesterday at 0.353%. 

- Spanish debt is underwater today; the 10Y spread to Germany is 1.4bp wider as

the market was reminded of the Catalan secession referendum by a DBRS report on

the topic. 

- Italian debt also suffered from poor 5Y & 10Y BTP alongside CCTeu auctions. We

had read many reports about strong Italian month-ends and good

redemptions/coupons so the poor result weighed badly.

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

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