ASIA/US/EUROPE BOND & STOCK RECAP: TSYS WEAKER

     US TSYS SUMMARY: Treasuries slid on firmer 0.6% July retail sales but then

rose midmorning on dip buying and as stocks softened.

US TSYS SUMMARY: Treasuries open NY Tuesday lower still after overnight risk-on

mood as N.Korea leader Kim Jong Un said he's been briefed on his military

ability to hit Guam with missiles, but not doing such tests, watching US

moves/signals. Risk assets gain thus again after Mon risk-on mood. Pres. Trump

to sign executive order on certain infrastructure projects later today. 

- TOKYO: Asian stocks gained with Japan's Nikkei +1.1%. Tsys declined after

N.Korea comments aired, rangey into UK cross amid two-way flows in 3Y, 5Y notes.

Asian banks bought 2Y-5Y notes. 

- LONDON: Lighter volume on Assumption Day holiday in some of Europe (Austria,

Belgium, France, Greece, Italy, Poland, Portugal, Slovenia, Spain and Catholic

parts of Germany, Switzerland.) Misc acct sales in US intermeds to long end vs.

real$ buying short end, credit-tied 30Y buying. Some sold belly/buy 10Y. Roll

volume picks up in Sep/Dec futures. 

- US SWAPS: Spreads mildly tighter into Amazon debt deal estimated $16B+ with

seven  tranches via BAML/GS/JPM. 

- O/N RP: Current 2Y notes remain tight once again.

EGBs have suffered alongside US Treasuries and global bond markets as the threat

from the Korean peninsular subsides. Bunds are also suffering from a lack of

liquidity as many trading centres are on holiday because of Assumption Day. 

- Italian BTPs have come under particular attention and the 15Y BTP is currently

5.5bp higher alongside the Bund-BTP 10Y spread widening 1bp to 162.7bp. 

- There has been no economic data and no bill or bond supply. 

- The German Constitutional Court referred a decision on the legality of the

ECB's QE program to the ECJ although the limited lifespan of the QE program

means that by the time the ECJ considers the case, there will not be much QE

that needs doing. However, the report said there were questions of whether PSPP

is compatible with the ban on monetary budget financing. 

- The Bund yield is currently 3.3bp higher at 0.436%.

GILT SUMMARY: Gilts opened weaker alongside all of the other major bond markets

as the threat from the Korean peninsular was downgraded in the minds of the

market. 

- The initial drop at the Gilt open was quickly caught as the Bund contract

rallied. Thereafter, the weak UK CPI data gave a further shove higher to the

Gilt contract. 

- Calendar roll activity picked up as banks are generally suggesting that longs

roll early. There isn't much duration difference between the two contracts and

so distortions caused by this are limited. 

- The UK has laid out its strategy for the Brexit negotiation, which includes a

transition period inside a customs union. However, it is a wish as opposed to a

certainty that this will eventually occur. 

- Gilt prices have surrendered much of their recovered ground in the past hour

as the Bund market has been driven 30 cents lower in very thin trading

conditions. Currently, the 10Y Gilt yield is 2.1bp higher on the day at 1.088%.

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

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