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ASIA/US/EUROPE BOND & STOCK RECAP: US TSYS FIRM AMID 2WAY FLOW

     US TSYS SUMMARY: Treasuries open NY Mon firmer after overnight two-way
flows. NY Fed said that NY Fed Pres. Dudley will retire in mid-2018. MNI Main
Wire had exclusive with SF Fed Williams saying incoming Fed Chair Powell was a
strong consensus builder, said three 2018 rate hikes puts Fed in best position. 
- TOKYO: Action picks up as Japan returns from Friday holiday. US Pres Trump
visiting Japan; met PM Shinzo Abe; visits S.Korea starting Tues. BOJ Kuroda
affirmed need for more easing. Tsys began with a mild bid, with intermediate
steepeners vs. long end, misc acct sales in 10Y. Asian central banks bought the
dips. 
- LONDON: Tsys big early tracking EGBs' lead amid soft EU PMIs, ECB Praet talk.
Fast money did two-way flows in 2Y, 5Y; deal-tied sales; real$ and bank buying
10Y, 30Y. 
- US SWAPS: Mildly mixed, wings tighter vs. wider intermeds; 5Y receiving
recently at 2.05553%; 2/3Y sprd steepeners, belly receivers. 
- EURODLR FUTURES: mildly higher. 
- US HIGH-GRADE CORPORATES: ANZ NY 3Y and 5Y issuance Mon, Rentenbank 10Y Tues.
EGB SUMMARY: Most of the gains in the EGB market were seen in the first hour, or
so, of trading. The Bund contract quickly beat the high from Friday before
moving to the day's high of 163.24. 
- The movement was initially led by the Bund and sources spoke of stop-losses
exaggerating the movement. Others noted that the ECB will need to step up
November purchases via the APP ahead of the waning liquidity conditions in
December, although last year the ECB spread the over-buying evenly across Oct
and Nov. 
- Eurozone final PMI data were revised marginally higher to 56.0 for the
composite indicator. 
- NY Fed announcement NY Fed President and dove, Bill Dudley will retire
effective mid-2018 failed to have a material impact upon the short end of the
USD or European markets. 
- Over the past hour, cash market buying has turned up in the belly of the
German curve, taking over from the Bund contract as the driver of prices. 
- Peripheral debt is underperforming modestly.
GILTS: ###The 10-yr/30-yr Gilt yield spread broke above 60bps earlier Monday,
the first time since Sep 19 after widening over 6bps following Bank of England
dovish rate hike on Thursday. 
- Now that the BoE monetary policy decision is out of the way, attention is
turning back to the Brexit negotiations and the likely hood of talks moving onto
a future trade deal by the end of the year or in Q1 2018. Carney over the
weekend said that Brexit is holding back UK growth as uncertainty is weighing on
business. Carney's ongoing comments on Brexit would suggest that if negotiations
went well it may prompt a rethink on the current rate path direction. 
- POV: There appears to be some behind the scenes talks between the key leaders
of the UK, EU, Germany and France, with the latest article from the Sunday Times
saying that UK signals it is willing to pay Stg53bln leads to EU negotiators to
start outlining a future trade deal. If the talks come to fruition and come the
end of the year talks move onto a future trade deal and the atmosphere improves
between the 2 negotiating teams, then market could start pricing in a higher
path of interest rates, leading to 10s/30s to flatten again/
--MNI New York Bureau; tel: +1 212-669-6432; email: sheila.mullan@marketnews.com
[TOPICS: MTABLE,MNUEQ$,M$U$$$,MR$$$$,M$$FI$,MN$FI$]

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