ASIA/US/EUROPE BOND & STOCK RECAP:TSYS WEAK,STEEP INTO 2Y SALE

     US TSYS SUMMARY: Treasuries open Tues NY weaker, steeper after overnight

declines followed Mon mild gain. Tsys pressured by corporate rate-locks and

pre-auction hedging into today's 1pm ET US$26B 2Y note auction. Action may be

limited: all await Pres Trump choice of Fed Chair, which news he said Mon cld be

"very, very soon." (He stated he'll name pick before his Asian trip begins

Nov.3) 

- TOKYO: Tsys steady to mildly bid, holding range into London cross, sources

reported real$ selling in long end. 

- LONDON: Treasuries declined more as EGBS weakened on various stronger European

PMIs. Sources cited bank buying 3s, fast$ 10Y two-way, real$ buying in 5s and

long end, sellers off-the-run 5s. 

- Tsys selling picked up speed before 8am ET, cash 10-year note hitting 2.410%

at 8:06 a.m. ET; but it is now 2.408%. The 2.40% is key technical area that

should draw buyers, but a major break above that shd bring sellers. US

swaps:mixed spds, light flow, deal-tied hedges. 

- US CORPS/SOVEREIGN BONDS: Tues CPPIB 10Y, ADB 10Y, KEXIM 3Y/5Y/FRN, Boral Fin

5/10.5Y.

EGB SUMMARY: The Bund contract open unchanged but has only gone downwards since.

The justification is more positioning than data-driven. 

- The 5Y part of the curve has led the weakness this morning; there was some

early initial activity in the 5Y swap (paying). The cheapening of the 5Y on the

2-5-10Y fly is a typical trade for tighter monetary policy. 

- Some stop-losses were triggered as the Bund contract broke through Monday's

low and the 61.8% Fibo of 160.24-162.78 level at 161.21 held the Bund contract

for quite a while before being broken. 

- There is little support out there today although, once again, the peripheral

markets are well bid. The Bund-BTP and Bund-Bonos spreads are 0.6bp and 2.3bp

tighter on the session. 

- Economic data consisted of the Markit PMI reports, which came in slightly

softer than expected for the Eurozone composite. There was no Eurozone supply.

GILT SUMMARY: The 10Y gilt futures followed the bunds lower in London morning

trading, which were seen weighed down by the flash EMU PMI data. The 10Y gilt

futures are currently trading 42 ticks lower at 124.18 near the day's lows. The

2-10Y part of the yield curve is modestly steeper while the 10-30Y part of the

curve is slightly flatter. 

- In a solid auction today the UK's Debt Management Office (DMO) sold Stg0.65bln

of inflation linked Gilt 0.625% at a yield of -1.549% with a bid-to-cover ratio

of 2.37 times. 

- Both UK breakevens and swaps spreads are trading mixed with 2Y swap spreads

currently trading 1.6bp tighter while the 15Y is 1.2bp wider and the 30Y

breakevens are 1.5bp wider. 

- UK Chancellor Philip Hammond is due to take questions from 1130BST at the

House of commons.

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

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