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     US TSYS SUMMARY: Treasuries opened NY Fri narrowly mixed, flatter, as
N.Korea overnight fired missile, UK had subway terror blast; prices did not fit
usual safe-haven bid expectations. Next:8:30 am ET US Aug retail sales; MNI poll
median est 0.1%, 0.5% retl sales ex-autos. - TOKYO: N.Korea missile sailed over
Hokkaido, Jpn & neared US's Guam before landing in Pacific; mild safe-haven bid
in Tsys but some later selling by trading accts, regional bks. Nikkei stk index
ended mildly higher. Unusual trading cld be as Jpn has Mon holiday, safe-haven
unwind speedier. 2way flow in Tsys and US swaps. 
- LONDON: Then a terror-tied explosion occurred in London subway, 18 injured.
But Gilts turned lower as BOE Vlieghe hawkishly urged future UK rate hike; also
pressured Tsys. Sources cited foreign central bank selling in 2s and 5s,
regional bk buying 5s and 10s. Some hope to buy Tsys, others to sell strength. 
- OVERNIGHT REPO: Tsy 5s, 7s and 10s tight. 
- US SWAPS: mildly tighter. 
- EURODLR FUTURES: Mildly lower. 
- HIGH-GRADE US$ CORPS: No issuance set today.
GILT SUMMARY: Gilts have taken another large knock lower, this time following
rather hawkish comments from Bank of England MPC member Gertjan Vlieghe, a known
dove, spurring rate hike expectations for November. 
- This time it is the 2-/10-year part of the yield curve that has come under the
most pressure and in-turn bear flattening the 10s/30s part of yield curve. 
- 10-yr Gilt yield 1.289%, up 6.2 bps on day.
- Gilts opened marginally lower as markets continued to digest the step-up in
BoE hawkish rhetoric Thursday, with some banks seen bringing forward calls for a
25bp rate hike at the next MPC meeting in November. 
- Gilts then spiked lower in knee-jerk reaction to hawkish Vlieghe comments --
Right time for rate hike may be in coming months. Plus in Q&A said he sees
tightening more than just reversing August cut. 
- Real yields in the 5-/10-year area have taken an even heavier battering, with
5-yr and 10-yr beakevens 7bp and 6.5bp tighter at 2.985% and 3.04%respectively.
While 5-yr swap spreads are over 6bp tighter at 32.1bps.
EGB SUMMARY: An eventful morning with a North Korean missile, a terror incident
on the London Underground (thankfully no fatalities) and a couple of central
bank speeches that moved the needle. 
- The reaction to the Korean missile was not significant as it seems the market
has become immune to such incidents. However, Bunds spiked on the news of an
explosion on a London underground but the big move of the day was linked to a
speech by a dove on the Bank of England, Vlieghe who appeared to endorse a near
term rate hike and later was quoted as saying that a tightening of monetary
policy might need to rise more than once if the economy develops as expected. 
- Gilt yields are 7-10bp higher today. However, the ECB's Lautenschlaeger from
the Bundesbank also put in a hawkish speech soon after Vlieghe and the Bund was
punished further, even if a hawkish speech by Lautenschlaeger is not so unusual.
- The rise in EGB yields has been led by the belly, with the Obl +3.2bp, the
Bund yieled up 1.6 bps to 0.426%. Peripherals are outperforming. 
- France announced the bonds and sizes for next Thursday's auction and Belgium
gave the size for their auction on Monday. There was no important data.
--MNI New York Bureau; tel: +1 212-669-6432; email:
[TOPICS: MNUEQ$,M$U$$$,MR$$$$,M$$FI$,MN$FI$]

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