US TSYS BEGIN WEAK, STEEPER; US$ CORP. BOND ISSUANCE REVIVES

     US TSYS SUMMARY: Treasuries prices open NY Tues/2018 weaker, steeper after

last Friday year-end higher close. Only US economic data today will be the

9:45am ET Dec Markit Mrfg Index; but this week brings key Friday Dec. jobs

report; MNI has median estimate of 190K, 4.1% jobless rate and 0.3% Avg Hourly

Earnings gain. 

- TOKYO: Tsys opened mildly weaker, holding narrow range on light volume into UK

open, Japanese markets closed until Thu. Strong gains in Asian equities,

Shanghai +2%, Hang Seng +1.99%. 

- LONDON: Tsys followed EGBs lower, incoming EGB supply weighed; pressure too as

ECB Coeure said was "reasonable chance that bond buying would not be extended."

Flows had bank sales in 3s, earlier misc buying 5s and 10s, prop and real$

selling 10s and 30s. 

- US SWAPS: Steady/tighter out curve. 

- US EURODLR FUTURES: Weaker, recent sale of 12,000 EDH 98.23. 

- OVERNIGHT REPO: Tsy 2Y, 10Y notes, and old 5Y, old 3Y all tight. 

- US HIGH-GRADE CORPORATE BONDS: BNP today has benchmark 144a/RegS sr non-prefd

7Y at T+120s; others line up to do new issuance.

GILT SUMMARY: Gilts have fallen sharply on the first trading day of 2018 wiping

out majority of last weeks gains, led by the 6.6bp move higher in the 10-year,

and not even getting on the back of a slight risk-off move. 

- Curve is pivoting with 2Y-10Y 2.7bp steeper, while 10Y-30Y is 0.5bp flatter.

2-yr swap spreads are 6.1bp tighter while breakevens are 1.5bp wider. 

- Gilts opened lower, weighed by weak European bonds as market took stock of ECB

Benoit Coeure hawkish comments over the weekend, talking of not extending its QE

(bond-buy) program. - Mar Gilt future than saw stop loss selling as it broke

through a couple of support levels, with three sizable block trades seeing going

through as well, which all appeared to be sells. - Even a slightly disappointing

UK manufacturing PMI release did not deter markets from selling as overall Q4

average pointed to a rise in sentiment compared to Q3. 

- Swap flows have been muted, however there appeared to be receiving in the

belly 10Y-20Y-30Y swap fly in Stg35k DV01

EGB SUMMARY: Core EGB markets sank from the start of 2018 trading, mainly the

result of an interview given to Caixin by one of the ECB Board hawks, Benoit

Coeure said that there was a reasonable chance that QE would not be renewed. 

- The 10Y Bund yield rose quickly from 0.427% to a new 2 month high of 0.46%

before cash buying showed up. 

- The final European Markit manufacturing PMI data were in line with the flash

indicator although the text accompanying the release provided ample anecdotal

evidence of increasing price pressures. 

- Around European mid-morning, a risk-off wave drove through the markets led by

a strong yen. Equities were weak and the Bund-BTP spread jumped quickly from

155bp to 162bp. A futures block trade that involved selling BTPs and buying

Bunds was identified but was not the full explanation of the 10Y core-peripheral

spread widening. 

- Irish debt is weak as the market is half-expecting a 10Y syndicated deal

announcement this week. 

- The 10Y Bund is +2.5bp higher at 0.452%; 2-10Y spread is +1.5bp at 106.1bp.

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

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