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Heavy Year-End Positioning Eurodollar Trade

US TSYS SUMMARY
Rates trading firmer after the bell, off early session highs on moderate overall volumes. Not much of a reaction to early session data, futures firmer but remain off pre-open highs after weekly claims (348k/-29k vs. 364k est), continuing claims (2.820M vs. 2.800M est) and fourth consecutive Philly Fed read (19.4 vs. 23.1).
  • No data Friday, markets do have Dallas Fed Kaplan to listen to at 1100ET.
  • Heavy Eurodlr volumes in front end, EDU1-EDH2 >1.1M. Year-end theme:
  • Near 40k EDZ1/EDH2 spds sold -0.035 late overnight, largely driven by nod towards Fed tapering before yr end Wed's July FOMC minutes. Traders also posit general funding worries in the event of a stock rout contributing to the sell interest.
  • Over 350k EDZ1 sold from 99.81 to 99.79 (-0.020-0.030) in late trade, total volume near 650,000; appr 50,000 EDU1 sold as well from 99.87 to .865.
  • Tsy announced offering amounts for next wk's 2-, 5- and 7Y note auctions -- as expected: $60B, $61B and $62B respectively. New addition: 67D-Bill CMB (Cash Management Bill): $40B with Nov 1 maturity -- "suggesting confidence that they will have room through Nov 1 for those concerned about the debt ceiling" one desk posited. Whether the 119D-Bill CMB that is annc'd one day prior, remains to be seen.
  • Strong $8B 30Y TIPS auction re-open: stops through -0.292% vs. -0.285% WI.
  • The 2-Yr yield is up 0.2bps at 0.2176%, 5-Yr is down 0.5bps at 0.7637%, 10-Yr is down 1.7bps at 1.2417%, and 30-Yr is down 2bps at 1.8776%.
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