US TSYS OPEN MILDLY LOWER; EGBS OUTPERFORM; IRELAND GOVT EYED

     US TSYS SUMMARY: Treasuries opened NY mildly lower Tue, curves narrowly

mixed. Tsy has a 1pm ET $28B 7-yr note auction. Fed Chair nominee Powell has

9:45am ET Sen Bank panel confirmatn hearing; Powell text released last night. 

- TOKYO: Tsys opened mildly weaker, early life insurance portfl dip buying,

modest 2way w/better selling into London open. 

- LONDON: Tsys range and EGBs outperform, despite European stocks improving as

German politics improve slowly. Flow included ongoing Dec/Mar rolling in futures

on good volume, selling in 5s, 2way in 10s w/bank portfolio buying. Steady

FX-tied sales as US$ gains vs. Yen, but US$ then ebbs to Y111.2568. 

- OVERNIGHT REPO: 5Y Tsys relax to still tight -1.50% Tues vs Mon -3%. bids in

2Y, 7Y, 10Y. 

- US SWAPS: Spds running mixed, steeper spd curve in-line w/Tsy curve. Receiving

in 5s and 10s, bk portf receiving intermeds vs wings, intermittent rate paying;

deal-tied flow in belly to long end. 

- US HIGH-GRADE CORPORATES: Deutsche Bank NY BM 15Y/NC10Y fixed/FRN, Emirates

Sembcorp Water & Power $500M 144a/RegS 18Y.

GILT SUMMARY: Gilts are trading mixed ahead of NY open Tuesday with the

short-end of the curve having reversed earlier move higher, while the ultra

long-end holds onto slight gains, therefore flattening the yield curve. 

- UK 10-yr -0.3bp at 1.258%. 

- Gilts opened modestly higher supported by move higher in US Treasuries

overnight and then extended gains despite encouraging words from BoE FPC

Financial Stability Report that showed UK Bank's would be able to withstand a

disorderly Brexit. 

- The move higher was faded though led by reversal in the short-end of the yield

curve, however the 10-yr was supported by Stg100mln receiver in 10Y swaps. 

- Gilts then came under pressure as DMO sold Stg400mln in 2060 Gilt mini-tender

and on newswire reports that Irish deputy Prime Minister has resigned, which is

likely to avoid fresh elections. 

- Swap spreads are mixed with 2-yr and 5-yr circa 1.5bp tighter while other are

modestly wider. While 5-yr and 10-yr breakevens are 0.5bp wider.

EGB SUMMARY: European debt markets have seen small gains with a familiar

outperformance by the peripheral markets, helped by the low level of volatility.

The German 10Y Bund yield is 0.4bp lower at 0.338%. 

- Alongside improved debt markets, European equities have carved out gains

demonstrated by the 0.5% rise in the eurostoxx. All assets appear to be rising

today. 

- Datawise, Eurozone Oct M3 numbers came in slightly light of expectations at

5.0%Y/Y, down from an upwardly revised 5.2%Y/Y. However, bank loans to

corporates leapt strongly. 

- German Oct import prices continued to grow above inflation at 2.6%Y/Y driven

by energy. 

- In the past days, the EUR FX rate appreciated close to the all-important 1.20

level against the dollar but has moved further away from that to 1.1889 today. 

 Irish political problems appear to be having no impact upon Irish debt. Behind

the scenes activity is frenetic at the moment aimed at avoiding a collapse of

government later today.

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

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