US TSYS: BULL FLATTENING CONTINUES, TRADE TENSIONS HEAT UP

US TSY SUMMARY: Tsys trade stronger after the bell, near early session highs

despite strong US$ gains, EM punished -- perhaps lending risk-off support, Gold,

equities, crude all weaker, however. Best volume of wk but still average

(TYU>1.4M), early risk-off bid as trade US/China tensions return, US Pres Trump

admin proposed another $200B in tariffs late Tue (not imminent/under review

through late August), US$ dropped immediately after annc but  regained footing

as session ground on.

- US$ index stronger DXY +0.564 to 94.722; US$/Yen higher +1.03 112.03

(112.17H/110.77L); equities weaker (emini -19.5, 2777.25); gold weaker (XAU

-12.80 1242.74); West Texas crude crushed but off late lows (WTI -3.49, 70.62,

70.02L)

- Little react to mildly stronger than expected PPI (+0.3%), strong $22B 10Y

note auction awarded 2.859% rate (2.962% in June; 3.114% avg) trades through vs.

2.865% WI. BOC Key Rate Up 25 bps To 1.50%, As Expected. Headline watching as

Pres Trump NATO summit gets underway. Tsy cash/ylds: 2Y 99-27.25 (2.576%), 5Y

99-14.5 (2.742%), 10Y 100-07.5 (2.845%), 30Y 103-15 (2.949%).

US TSY FUTURES CLOSE: Stronger -- off midday lows by the bell, bouncing in last

hour even as US$ climbed (DXY +.560, 94.718; US$/Yen +1.00, 112.0). Current cash

10Y 100-08.5 (2.842%) vs. 100-01.5 (2.853%) late Tuesday. Curves moving flatter:

* 2s10s -1.333, 26.418 (25.869L/28.109H);

* 2s30s -1.502, 36.703 (36.163L/38.815H);

* 5s30s -0.410, 20.294 (18.997L/21.086H);

Current futures levels:

* Sep Ultra bonds up 24/32 at 160-18 (160-03L/160-30H)

* Sep 30-yr Bond futures up 15/32 at 145-15 (145-03L/145-24H)

* Sep 10-yr futures up 8/32 at 120-08.5 (120-02.5L/120-13H)

* Sep 5-yr futures up 4.75/32 at 113-17.75 (113-13.75L/113-20.75H)

* Sep 2-yr futures up 1.25/32 at 105-26.5 (105-25.5L/105-28.25H)

US EURODOLLAR FUTURES CLOSE: Modestly higher by the bell, near session highs on

modest volume. Current White pack (Sep'18-Jun'19):

* Sep'18 +0.010 at 97.540

* Dec'18 +0.010 at 97.340

* Jun'19 +0.020 at 97.220

* Jun'19 +0.020 at 97.120

* Red pack (Sep'19-Jun'20) +0.025-0.030

* Green pack (Sep'20-Jun'21) +0.040-0.045

* Blue pack (Sep'21-Jun'21) +0.040

* Gold pack (Sep'22-Jun'22) +0.040-0.035

US DOLLAR LIBOR: Latest settles,

* O/N -0.0010 to 1.9182% (-0.0074/wk)

* 1 Month +0.0077 to 2.0742% (-0.0120/wk)

* 3 Month -0.0004 to 2.3370% (+0.0057/wk)

* 6 Month +0.0005 to 2.5123% (+0.0042/wk)

* 1 Year -0.0025 to 2.7784% (-0.0003/wk)

US TSYS: *** /REPO REFERENCE RATES: (rate, volume)

* Secured Overnight Financing Rate (SOFR): steady at 1.89%, $762B

* Broad General Collateral Rate (BGCR): steady at 1.87%, $381B

* Tri-Party General Collateral Rate (TGCR): steady 1.87%, $362B

US SWAPS: Spds running mostly tighter by the bell, short end on narrows, balance

of spds holding narrow range light flow. Decent deal-tied flow in short end,

large >1B payer 1s around 1.629%, 2-way in 2s, 2s/5s steepener late. Latest spd

levels:

* 2Y  -1.12/24.00

* 5Y  -0.44/14.56

* 10Y +0.00/7.88

* 30Y +0.50/-2.75

PIPELINE: High-grade issuance picks up w/NIB, Honda Finance

Date $MM Issuer/Rating/Desc/Maturity/Yld/Leads; Priced *; Launch #:

07/11 $1.75B #American Honda Finance $500M 2Y fix +50, $750M 2Y FRN L+26, $500M

5Y +75

07/11 $1B Nordic Investment Bank (NIB) WNG 5Y +5a

OUTLOOK: Data/speaker calendar (prior, estimate): 

- Jul 12 07-Jul jobless claims (231k, 226k) 0830ET

- Jul 12 Jun CPI (0.2%, 0.2%) 0830ET

- Jul 12 Jun CPI Ex Food and Energy (0.2%, 0.2%) 0830ET

- Jul 12 08-Jul Bloomberg comfort index (57.6, --) 0945ET

- Jul 12 06-Jul natural gas stocks w/w 1030ET

- Jul 12 Phi Fed Pres Harker, Global Interdependence Center, Id, Q&A, 1215ET

- Jul 12 US TSY $14B 30Y bond auction, Jul 16 settle, 1300ET

- Jul 12 Jun Treasury budget balance (-$146.8B, -$135.0B) 1400ET

- Jul 12 11-Jul Fed weekly securities holdings 1630ET

- Jul 12 Mn Fed Pres Kashkari, Worthington Int, Immigration Panel, Q&A. 2000ET

Eurodollar/Treasury Option Summary

Eurodollar options, Pit/screen:

* -5,000 Green Aug 76 calls, cab

* +30,000 short Dec 71 calls 3.0 over the Green Mar 75 call spds covered

* -15,000 Green Sep 68 puts, 6.0 vs. 97.005/0.28%, adding to early morning Block

* -3,500 Sep 75/short Mar 70 straddle spds, 36.0

* +5,000 Red Sep 68/68 3x1 put spds, 5.0

* -5,000 Red Mar 60/70 2x1 put spds, 27.0

* +4,000 Green Aug 67/68 put strip, 4.0

* +30,000 Red Sep19 87 calls, 1.0 on screen last couple minutes

* 8,000 Mar 80 calls, 1.0 on screen

* +6,000 Jun 78/82 call spds, 1.5 w/

* +6,000 Jun 80/83 call spds, 1.0

* 5,250 Jun 78/80/82/83 call condors on screen

Block, 0854:15ET,

* 10,000 Green Sep 68 puts, 6.0 vs. 97.005/0.28%

* 5,000 Sep 82/83 put spds vs. Mar 70/72 put spds on screen

* 5,000 Sep 75 puts, 2.25, 97.535/0.34%

* +5,000 short Oct 66/67/68 put flys, 2.0

* +10,000 Aug/Sep 76 call spd, 0.0

* Update, -25,000 Mar 70/72 put spds, 11.0 vs. 97.22/0.32%

* 25,000 Mar 70/72 put spds, 11.0 vs. 97.22/0.32%

* +5,000 Dec 73/75/76 call flys, 2.0

* 1,500 Aug 75/76/77 call flys, 3.75

* +20,000 Aug 77 calls, cab

* 15,000 Sep 82/83 put spds

* 14,000 Sep 75 puts, 2.25 (12k Blocked at 0532ET)

* 4,000 short Dec 63/66/68 put flys vs. 75 calls

* 6,500 short Dec 70/71/73 call trees

Tsy options, Pit/screen:

* 2,000 TUQ 106.1 calls, 1.5/64 vs. 105-27.25

* 2,340 FVU 112.75/114.25 strangles, 15.5/64

* 1,000 TYU 119.5/121 strangles, 40/64

* 2,000 TYQ 122 calls, 2/64 vs. 120-05.5/0.10%

* 1,000 USQ 144 puts, 21/64 vs. 145-05/0.26%

Block, 0927:00ET, offered

* +30,204 TYU 122 calls, 8/64

* 3,348 TYU 116/117/119 3x3x1 put trees on screen

* 3,000 FVQ/FVU 113.25 put spds, 9.5/64

* +5,000 FVU 113/114.25 put over risk reversals Block, 1.5/64

* +5,000 TYQ 121.7 calls blocked at 3/64 vs. 120-11.5/0.10%

* +3,500 TYU 118/118.5/119/119.5 put condors, 5/64

* 6,000 TYQ 120/120.75 put over risk reversals, 3- to 4/64

* 2,600 TYU 118/121.5 call over risk reversals, 8/64

--MNI Chicago Bureau; tel: +1 312-431-0089; email: bill.sokolis@marketnews.com

[TOPICS: MTABLE,M$U$$$,M$$FI$,MN$FI$,MN$FX$]