ASIA/US/EUROPE BOND & STOCK RECAP: TSYS SLIDE, WEAK TECHS

     US TSYS UPDATE: Treasuries slid in early NY action, hitting a high 10-year

note yield of 2.475% at 8:46 a.m. ET before some dip buying emerged; now 10-year

note is at 2.461%.

     US TSYS SUMMARY: Treasuries open NY weaker after Wed overnight followed

Tues technical slide. Tsy has 11:30am ET $15B 2Y FRN auction, 1pm US$34B 5Y

auction. 

- TOKYO: Tsys narrow range after mildly weaker open, carryover weakness amid

speculation John Taylor lead candidate for Fed Chair (after Trump GOP straw poll

Tues suggested that.) Asian banks bought cash 5Y notes. 

- LONDON: Tsys declined, tracking Bunds down amid German 10Y auction, firmer

German Ifo data; weaker UK Gilts after UK GDP data. Credit-tied sales hurt cash

5s and 10s. Macro funds sold 10Y notes. Sell-stops hit as 10-yr note has broken

over 2.40%, 2.42% and briefly 2.44%; 2.454% at 5:46am ET session high yld.Fast$

meanwhile did two-way in cash 5s. 

- Fed Chr Yellen has "unlikely advocate": Pres. Trump, said BBG, citing sources

saying she wanted to keep job, set no 2nd term precondition, suggested good

VChrs to Trump. 

- US SWAPS: Tighter; supply weighed; real$ receiving. 

- OVERNIGHT REPO: Tsy 2Y, 5Y notes tight; also old 2Y, old 3Y bid. 

- US CORPORATES: Korea Hsg Fin 5Y, Sweden 3Y, BNG 2Y; China US$ bond seen Thurs.

GILT SUMMARY: Gilts are trading sharply lower with the 5-yr and 10-yr part of

the yield yield curve taking the brunt of the selling, following better than

expected UK 1st estimate of Q3 GDP, cementing expectations of BoE raising rates

next week. Comments from David Davis that he is hopeful of a Brexit transition

agreement in Q1 2018 also seen weighing. 

- 10-yr Gilt yield is +6.7bp higher at 0.1.419%. 

- Gilts opened a touch higher and were seen treading water before spiking lower

in knee-jerk reaction to surprise pick up in Q3 growth to 0.4% q/q from 0.3%

q/q. The 5-yr and 10-yr took the brunt of the selling with yields rising over

5bp higher and the 5-yr reaching highest level since referendum vote last year.

- The GDP figures were seen cementing the chances of a BOE rate hike next week,

with the question now being the likely size of the vote. MNI PINCH see markets

pricing in a 88.5% chance of a 25bp rate hike on Nov 2. 

- A large bearish trade was bought in short sterling options, looking for faster

rise in rates next year. Swap spreads are mixed while breakevens are +1bp.

EGB SUMMARY: A decent start to trading was quickly surrendered following strong

IFO data and soon after, Bunds followed the Gilt market lower as UK GDP data

came in stronger than expected. The contract is currently trading around the

lows of the day. 

- The German Finanzagentur sold E3.0bln of the 10-year benchmark 0.50% Aug-2027

successfully with a bid-to-cover ratio of 1.7 times coming in higher than the

previous 6 auction average of 1.48 times. 

- The spread between the Bund-Bonos tightened by 3.3bp to 115bp as Spanish PM

Rajoy commented in Parliament that the only solution to the Catalan problem was

through fresh elections in the region. Italian spreads to Germany were largely

stable. 

- There was a very large payer of 7Y swaps soon after 0900BST that was passed

around the street several times. There was also a decent underperformance of the

7Y sector of German curve that may have been influenced by the swap trade. 

- Traders await ECB meeting tomorrow.

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

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