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Bull Cycle Intact

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     US TSYS SUMMARY: US Treasuries open NY mildly weaker after overnight range
trade and two-way trading flows. 
- TOKYO: Tsys gain early amid buying as Wash Post said Senate tax plan wd delay
corp. tax cut a year; analysts noted it's early & must be compromise between
Hse, Sen bills. Tsys ebbed amid rangey 2way flow. 
- LONDON: Tsys long end inched off low with German Bunds; lvrgd acct selling in
3Y note, macro fund buying 5Ys; bank portfls mixed 5Y. Tsys pressured by corp.
supply, pre-auction shorts/sales into 1pm ET $23B 10Y auction. German Bunds hit
high on 7,500-contract UK Gilt 10Y futures block buy at 12:51pm GMT/7:51am ET. 
- US SWAPS: Steady/mixed: 10Y, 2Y receiving; 5Y, 30Y paying; fast$ sold curve. 
- US EURODLR FUTURES: Steady/mildly lower; short end sale before 7:15am ET: 15K
Red Dec'18 at 98.06. 
- US HIGH-GRADE CORP. BONDS: Wed African Development Bk 5Y, $3.0B KFW 3Y.
Tuesday had $22.25B in issuance. 
- OVERNIGHT REPO: 3Y, 10Y tight as would be expected amid auction-tied shorts;
old 3Y, 10Y bid.
EGB SUMMARY: The bund contract started slowly but a block trade was reported mid
morning that drove the Bund up to the previous contract higher of 163.43 and
beyond. 
- The new contract high of 163.46 was set in a flurry of stop-losses being fired
off but as the market calmed, the price receded. 
- Spanish debt has been underperforming today but comes after a strong week for
peripheral debt. There is a general strike in Catalonia today and protestors set
up road- and rail-blocks. 
- The 5Y German auction and 10Y Portuguese auctions were okay, rather than good;
their influence upon prices was quite limited. 
- EUR swap flows have seen some EUR150k+ steepener in the 10-12Y. This follows
on from considerable activity in the 10-15Y area of the EUR swap curve. This
trade was recycled around. 
- In futures there was a 1,359 IKZ7 @ 140.54 at 1028GMT -- price action
suggested this was sold. 
- The Bund yield is 0.7bp lower at 0.325 in modest volumes.
GILT SUMMARY: Gilts have extended their opening gains led by the long-end and
in-turn bull flattening the yield curve as UK political and Brexit uncertainty
builds once again. 
- Gilts opened modestly higher likely supported by growing pressure on PM May to
sack development secretary Priti Patel with any delay seen as showing the PM to
be weak. There was also anger amongst MPs over the delay in publishing the
Brexit impact studies. A Reuters story that said EU officials will start
"sketching out" a 2-yr transition deal allowing the UK to stay within the single
market, but could be delayed to benefit Europe at expense of the UK, also likely
underpinned Gilts. 
- Gilts then extended gains despite a relatively upbeat BoE business condition
survey that showed continued modest growth in investment intentions and firms
seeing pay edging higher and forecast pay deals rising in 2.5% to 3.5% range. 
- Swap spreads are mixed, curve steeper, while breakevens are little changed.
--MNI New York Bureau; tel: +1 212-669-6432; email: sheila.mullan@marketnews.com
[TOPICS: MNUEQ$,M$U$$$,MR$$$$,M$$FI$,MN$FI$]

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