Tsys weaker by the bell, large Block...>

US TSY FLOWS: Tsys weaker by the bell, large Block buy +20k FVZ 112-10 through

-09.5 offer helps explain late drift off lows. Relative quiet ahead expected

.25bp hike from FOMC 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.

- Overview, while rates remain under pressure, pricing in tighter policy odds

for year end and beyond, 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 99-26.5 (2.835%), 5Y 98-30.25 (2.980%), 10Y 98-03.5

(3.096%), 30Y 95-19.5 (3.229%).