US TSYS OPEN NY WEAKER; CHINA ADDS LIQUIDITY

     US TSYS SUMMARY: US Treasuries opened NY weaker after an overnight drift

lower that picked up speed at 2am ET and 4am ET roughly, and coincided

with US$/yen strengthening.

- TOKYO: Tsys initially bid but then declined amid firmer US$/yen; Tsys

also pressured as Asian stocks rebounded from Wed slide, Japan's Nikkei

ended up 1.5%. Fund selling occurred in 10Y notes. Jpn MOF said had been

sales of $0.9B in foreign bonds in wk ended Nov10th, vs. -$6.4B pvs wk.

- PBOC injected CNY330B into banking system via CNY30BN 63-day reverse

repos, CNY140B 14-day reverse repo and CNY160B 7-day reverse repo, to

ease financial system liquidity amid tax & bond payments.

- LONDON: Tsys had risk-on tone amid firmer European equities. Fast$ and

real$ sold 5Y, 10Y notes while others did 5/30Y flattener. Tsy futures

had 5/30Y block flattener prior to 2:43am ET: sales of 10K FVZ7 vs. buy

of 2,350 USDZ7 done at 153.26; deemed unwind of last Fri 5/30Y steepener

from last Fri (a buy 10K FVZ at 117-03.25/vs. sale 2.35K USZ at 153.00).

Also earlier Thurs was a block of 4,047 Dec 10Y-Ultra at 133-31, crossed

on offer. EGBs had supply tied pressure amid Spain, French debt supply.

- US SWAPS: Wider, rebound off recent short end lows.

- EURODLR FUTURES:Lower: Heavy EDZ7 sale: 50K after higher 3m Libor set.

- OVERNIGHT REPO: Tsy 5Y tight, Tsy G/C higher at 1.29%.

- US CORPORATE BONDS: Scant issuance Thursday expected.

EGB SUMMARY: EGBs improved late Thursday after a heavy lump of supply duration

and a recovery of risky assets weighed on EGB prices today. The 10Y Bund yield

is lower by 0.1 higher at 0.372; the French linker auction passed and marked an

end to the assault.

- The auctions generally went well despite the choice by the Spanish Treasury to

allocate heavily to the 50Y security, which meant that ~40k Bund

contract-equivalent of Spanish debt was sold today and the biggest

non-syndication Spanish supply day of the year.

- Spanish debt is performing well today as the IBEX equity index leads the

European bourses higher with a 1.3% gain. The Bonos-BTP has moved away from one

year lows. However, it is Portuguese debt that is strongest with a 4bp

compression in the Bund-PGB 10Y spread.

- Italy held back a little on the amount of BTP Italia securities that they

sold, allocating only around 30% of the E11bln institutional order book that

showed up today. With the retail orders, the total issue size is E7.1bln.

- This week is now the largest EGB supply week of 2017 using nominal amounts.

GILT SUMMARY: UK Gilts are trading lower and close to intra-day lows as 10-yr

Gilt supply and hopes of a Brexit breakthrough weigh on sentiment. The 10-yr

Gilt yield +1.9bp at 1.302%.

- Gilts opened little changed, but then drifted lower as The Sun newspaper said

PM May is preparing to increase Brexit divorce bill offer to the EU in December

to kick start next round of talks. Upcoming 10-yr Gilt supply was also seen

weighing on sentiment.

- Dec Gilt future extended losses as retail sales edged slightly higher than

expected with total sales rising 0.3% in October and then dropped to session low

despite decent set of results for the 10-yr Gilt re-opening auction with demand

higher and tail tighter. Gilts then remained in bottom end of the day's range as

Downing Street spokesman did not deny The Sun story.

- Both swap spreads and breakevens are marginally tighter but lack direction.

- Up next Mark Carney, Ben Broadbent, Jon Cunliffe, Jo Place, Dave Ramsden, Sam

Woods all appear at an economic forum at St George's Hall Liverpool at 1400GMT.

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

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