Tsys holding weaker after midday,......>

US TSY FLOWS: Tsys holding weaker after midday, off early session lows, pace of

trade moderating in second half. Market widely expects FOMC to announce third

.25bp hike at tomorrow's annc, while continued selling in short end has pushed

chances of rate hike at year end over 90%.

- US$ still weaker but off lows (DXY slipped -.176, 94.020L); 10- and 30Y ylds

near mid-May's 4-year highs. Light deal-tied flow, sporadic month end buying.

Second leg Tsy supply $38B 5Y tailed slightly, awarded 2.997% rate vs. 2.992% WI

(awarded 2.765% in Aug; 2.522% avg), bid/cover 2.39 vs. 2.49 previous (2.50

avg). Earlier fast- and real$ selling intermediates, program selling 10s.

- Theme for day/week, rates remain under pressure, pricing in tighter policy

odds for year end and beyond. However, some large option and futures plays are

trading -- hedging a less aggressive Fed by year end 2019: large buying

Eurodollar Dec'19 1yr midcurve upside calls funded by large selling downside

puts; in futures: over +50k EDZ19 vs. EDZ20 at 0.045. 

- Tsy cash/ylds: 2Y 99-26.25 (2.839%), 5Y 98-29.75 (2.983%), 10Y 98-02.5

(3.100%), 30Y 95-17.5 (3.233%).