ASIA/US/EUROPE BOND & STOCK RECAP: TSYS OPEN NY WEAK, DIP BUYS

     US TSYS SUMMARY: US Treasuries open NY Monday weaker but off the

3:48am-4:30am ET session price lows, rebounding mildly amid 10Y Tsy futures

buying and apparent delayed reaction to Las Vegas shooting and Spain's Catalan

independence vote. 

- TOKYO hours saw Tsys traded weaker after open, two-way in 10s Japanese acct

selling in long end. Asian end users bought 10Y, 30Y. Foreign central ban buying

occurred China and S. Korea have market holidays this week; still strong China

PMIs pressured Tsys. China cut banks' required reserves ratio by 50 bps.

 - LONDON: Tsys had initial carryover selling by hedge funds in 10Ys, other

2/30Y and 3/30Y steepeners. But Tsys rebounded off lows amid large apparent buy

in TYZ7 futures of 7,350 at 125-00 at 4:29am ET. Tsys aided too as Bunds

improved as peripheral EGB spread widened as hurt by Spain Catalan vote. Macro

funds did steepeeners. End-users bought 2Y, did two-way in 10Ys. Catalonia voted

for independence, but Spanish government could "impose direct rule," according

to the Independent. 

- US SWAPS: Mildly wider across curve. 

- US OVERNIGHT REPO: Tsy 2Y notes loosen amid 2/5/7Y auction settlement Monday,

while 3Y, 5Y, remain tight. 

- US HIGH-GRADE CORPORATE/SOVEREIGN ISSUANCE: Brisk issuance lines up today.

GILT SUMMARY: Gilts are trading slightly higher having reversed opening losses

in wake of softer than expected UK manufacturing PMI and block buy in US

Treasury futures. Curve is bull steepening as front-end out performs. 10Y Gilt

yield is at 1.324%, lower by 3.3 bps at 9:47am ET. 

- Gilts opened lower led by the 10-yr part of the yield curve, taking cue from

overnight sell-off in USTs as markets react to comments from Fed's Harker that

he's "pencilled in" a rate hike in Dec and base case is for 3 more next year. 

- Gilts reversed losses though as UK Sep mfg PMI dropped more than expected to

55.9 from downwardly revised 56.7 in Aug, and 7.35k block buy in TYZ7 contract. 

- In the UK key events will be the Conservative Party conference in Manchester

and PMIs over the next few days. Chancellor Hammond has already been on the

wires ahead of his party conference speech saying that the underlying health of

the economy is strong, but working through difficult period. 

- UK breakevens are little changed while swap spreads are mixed with 2-yr 2.3bp

wider, while 10-yr, 15-yr and 30-yr are around 1bp tighter.

EGB SUMMARY: German bunds recovered from the morning lows and are up 21 ticks

from the close on Friday at 161.22. The rally can be attributed to a moderate

risk-off sentiment due to the Catalan referendum and the mass shooting in Las

Vegas where at least 20+ people said to be dead. 

- As a result of the Catalan referendum, the Spanish 10-year benchmark yields

increase to session highs of 1.697%. The Bund-Bonos yield spread widening to

124bp which is 10bp+ higher on the day. Other peripheral markets have been

impacted by the Spanish move. 

- Aside from the impact on Spanish debt, the euro has lost around 75 cents

against the dollar since Friday. There is considerable attention upon the euro

in the debt markets at present. In tune with the usual pattern in October, the

5Y German yield is performing strongest on the curve. 

- In Eurozone data, final Manufacturing PMI for September was revised 0.1 lower

from the flash estimate to 58.1. The Eurozone unemployment rate for August came

in at 9.1%, which was slightly higher than expected.

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

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