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

     US TSYS SUMMARY: Treasuries prices open NY weaker, intermediates (5Y,7Y)

underperforming, while wings 2Y, 30Y off more mildly in price. 

- TOKYO: Tsys began steady/mildly mixed, holding narrow range through London

crossover, quiet as market players eyed China Pres. Xi Jinping's three-hour-plus

speech at China Communist Party leaders conference. Shanghai stock index -0.3%,

while Japan's Nikkei +0.10%. Singapore out on holiday. 

- LONDON: Tsys saw more selling in intermediates and 10Y cash notes, with

weakness speeding up 3:32am ET in 10Y note at 99-16/32 (2.307%) to 2.336%

session high yld hit 5:56am ET. Tsys pressured by carryover sales from weaker

EGBs amid setup for 30Y German Bund sale. Varied accts sold 5Y, 7Y, vs bought

30Y cash. US$ gains spurred FX-tied sales. And 7:52am ET apparent block buy

inTsy 10Y futures: 5,000 TYZ at 125-04.5 cross on offer post time; previous TYZ

sales from 125-04.5 to 125-05.5. 

- US SWAPS: Overnight had light 2way, fast$ rate receiving in 2Y, 5Ys. 

- US CORPS: Wed RBC 3Y Fixed/FRN, Ecuador 144a/RegS 10Y, Banco do Brasil lg 7Y

and UnitedHealth Group six-part debt deal. 

- US OVERNIGHT REPO: Tsy 2Y, old 2Y, old 5Y, old 7Y tight in RP.

EGB SUMMARY: The German 10Y Bund yield is currently trading 2bp higher at 0.385%

after climbing rapidly this morning. It appears to have been initiated following

selling in US Treasury markets and later in the Gilt markets on the UK real

wages. Volumes leapt, and soon after block trades were evident in Gilts,

Treasuries and Bunds. 

- Later in the morning the Dec-17 Bund contract broke support at the 162.35

level (Oct 17 low) triggering stops. All this happened, at the same time as the

DAX index exploded higher. 

- The Thursday deadline for the Catalan Regional Government to furnish

clarification on its independence referendum is weighing on the Spanish debt

markets. The 10Y Bund-Bonos spread is currently trading wider by 2.2bp at

120.3bp.

- The ECB President Draghi spoke but failed to discuss monetary policy. 

- Germany successfully auctioned E1bln of the 30-year Bund 1.25% Aug 2048. 

- The Irish market performed strongly early in the session, helped by an IGB

E6.2bln redemption. We also heard of very heavy 5Y BTP screen buying early on.

GILT SUMMARY: After a a positive start UK Gilts have faded lower in wake of tick

higher in average weekly earnings and shape selling seen in US Treasuries and

German Bunds. Yield curve is ever so slightly steeper with 2s/30s 0.3bp wider. 

- Gilt 10-yr yield +4.1 bp at 1.314%. 

- Gilts opened modestly higher, underpinned by continued concern over Brexit

(LSE warning transition deal needs to be agreed by year end otherwise financial

firms will start leaving), however, faded the move as market looked ahead to key

UK labour Market Survey. - Tick higher in AWE ex-bonus seemed to be the catalyst

for selling in Gilts, which was then picked up by UST market which sold off

heavily as Yen weakened against the US Dollar. A block sell of 1k Gilts future

at 124.65 also weighed. - Another bout of selling in German Bunds and spike in

equities pushed Gilts to intra-day lows, although some light buying enable them

to pare losses. 

- UK 2-yr swap spreads have tightened sharply following 2-days of moving higher

and are back below 36bps. While 10-yr & 30-yr breakevens are circa 2bp tighter.

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

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