US TSYS OPENED NY FIRM: RISK-OFF MOOD, WEAK STKS, COMMODITIES

     US TSYS SUMMARY UPDATE: Treasuries improve amid tame 0.1% Oct CPI and 0.2%

CPI Core.

US TSYS SUMMARY: Treasuries open NY firmer after flight-to-quality buying and

overnight risk-off mood and weaker global stocks. Cash 2/10Y at flattest in a

decade, around +66.30 bps, flatter by 2.5 bps on day. 

- TOKYO: Treasuries bid again amid weaker global equities and weaker US$ (vs.

Yen). Nikkei stock index -1.6%. Sources reported strong buying from pension

funds and insurance portfolio. 

- LONDON: Treasuries gained with core EGBs though German 10Y auction proved

weak. Flows had fast$ and prop buying 5s and 10s, while insurance portfolio,

real$ bought 10s, 30s; bank buying in 30s. Macro buying in front end. Tax reform

uncertainty, anxiety over debt ceiling (temporary fix expires Dec.8th) likely

adding to bid. 

- OVERNIGHT REPO: No particular Tsy note specials; 3/10/30Y auctions settlement

Wed. 

- US HIGH-GRADE CORPORATE BOND ISSUANCE: Moderate issuance expected, with

Citadel, Germany's Federal State of N.Rhine Westphalia US$ 18M FRN syndicated

debt deal (3ml+5s). 

- US SWAPS: Steady/mildly tighter in wings; front end flatteners earlier; 5Y,

8Y, 9Y had NY morning receiving. Overnight had long end receiving. 

- US EURODLR FUTURES: Higher, long end outperforms; heavy buying in Whites-Reds,

EDH8 leads with 190K.

GILT SUMMARY: Gilts have faded from session highs but remain elevated, supported

by risk-off sentiment and surprise fall in the number of employed people in the

UK. While tension in parliament and between the Tories is expected to rise as EU

withdrawal Bill continues its way through the House of commons. - 2-yr Gilt

yield is -0.6bp at 0.475%, 5-yr -2.1bp at 0.744%, 10-yr -2.8bp at 1.285% and

30-yr -2.5bp at 1.861% according to Tradeweb. 

- Gilts opened Wednesday higher and then extended gains as risk off flows

continued to influence the markets with European stocks falling heavily. Gilts

then squeezed to fresh highs in wake of UK labour survey data that showed

employment falling for the first time since Oct 2016, while pay growth was

little changed at 2.2%, still way below headline inflation. One bright spot

though was the 0.9% increase in productivity in the third quarter, the highest

gain since start of 2011. 

- Gilts faded though as markets took profits and looked ahead to comments from

BOE Ben Broadbent and then key US inflation data this afternoon. 

- Breakevens are around 2bp tighter while swap spreads are little changed.

EGB SUMMARY: A fairly stereotypical risk-off trade today as equities and

commodities continued their declines. Global core bond markets have benefited

with the Bund yield down 4.4 bps to 0.350 by 8:47am ET.  

- Bond curves are also flattening aggressively and the 2-10Y UST spread has

broken to decade lows and sparking curve stop losses, which have aided further

UST curve flattening. 

- The rallying Bund contract clearly muddied the 10Y Bund auction set up, which

ultimately saw bids fall short of the E3bln available for sale. However, this

bad auction result was brushed aside - seen as a function of the market dynamic.

- Peripheral yield spreads to Germany are wider: Italy +1.6bp, Spain +2.3bp and

Portugal +5bp. The European iTraxx X-over is 7.4bp wider at 255bp. 

- The German 2-10Y spread is sitting at 107.3bp, equal to the curve spread lows

seen in September. 

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

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