US TSYS DECLINE ON RETAIL SALES, THEN CREEP UP ON DIP BUYING

     US TSYS SUMMARY: Treasuries prices ended Tues lower, but well off morning

selloff lows, after dip buying, block trade buys in Tsy futures and FX-tied bid.

Treasuries opened NY weaker (after overnight risk-off bid unwind as N.Korea/US

calm.) Mkt slid as higher 0.6% July retail sales fueled fear of late 2017 rate

hike esp. after NY Fed Dudley. Flattener unwinds in 5Y, 10Y Tsys vs. 30Y; prop,

real$ and bank selling in 5Y, 10Y. Bk, insurance portf sales arose in 30Ys. Deal

tied selling occurred earlier, with talk MBS acct selling out the Tsys curve. 

- Tsys saw 9:02am ET sale of 8,000 TYU 10Y futures, 9:18am ET 5,000-contract TYU

buy at 126-02, 10:22am ET buy of 5,000 TYU, 11:42am ET block buy of 10,000 FVU

5Y futrs. - Tsys short-cover, FX-tied buying amid soft US$/yen, real$ buying 7Y,

10Y Tsys. End users bought front end earlier. Foreign central bks did mixed

front end flow. Some thought Street did steepeners Fri before Tue long-end-wtd

corp. bond issuance. Sep- Dec Tsy futures roll: about 1-2% of Sep OI rolled so

far. 

- Amazon launched a $16B 7-part high-grade US$ debt deal amid heavy issuance. 

- Tsys 3pm ET: 2Y 1.351%; 3Y 1.513%; 5Y 1.817%; 7Y 2.084%; 10Y 2.264%; 30Y

2.840%.

US TSY FUTURES CLOSE: Weaker across the curve, off first half lows, long end

underperforming. Volume rather light. Current futures levels: 

* Sep Ultra bonds down 1-3/32 at 166-16 (165-19L/167-17H) 

* Sep 30-yr Bond futures down 24/32 at 154-13 (153-24L/155-06H) 

* Sep 10-yr futures down 12.5/64 at 126-05 (126-00.5L/126-18H) 

* Sep 5-yr futures down 7.5/32 at 118-08.5 (118-06.25L/118-16.25H) 

* Sep 2-yr futures down 1.75/32 at 108-05.75 (108-05.25L/108-07.75H)

US EURODLR FUTURES CLOSE: Weaker by the bell, off first half lows. Current White

pack (Jun'17-Mar'18): 

* Sep'17 -0.005 at 98.662 

* Dec'17 -0.015 at 98.540 

* Mar'18 -0.030 at 98.460 

* Jun'18 -0.035 at 98.405 

* Red pack (Sep'18-Jun'19) -0.035-0.040 

* Green pack (Sep'19-Jun'20) -0.045-0.050 

* Blue pack (Sep'20-Jun'21) -0.050-0.055 

* Gold pack (Sep'21-Jun'22) -0.050-0.055

US SWAPS: After drifting around steady/mixed levels most of session, spds inch

tighter late, 5yr leading move. Largely driven by deal-tied flow, some dealers

like Citigroup expecting surge in issuance to weigh on spds, in particular 5s,

see 1425ET bullet. OTC vols off first half highs as underlying rates bounced off

lows. Latest spread levels: 

* 2Y -0.06/25.44 

* 5Y -0.75/7.00 

* 10Y -0.38/-4.88 

* 30Y -0.12/-33.56

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

- Aug 16 11-Aug MBA Mortgage Applications (3.0%, --) 0700ET

- Aug 16 Jul housing starts (1.215M, 1.220M) 0830ET

- Aug 16 Jul building permits (1.275M, --) 0830ET

- Aug 16 Aug NY Fed Business Leaders Index (-0.7, --) 0830ET

- Aug 16 Aug Atlanta Fed inflation (1.7%, --) 1000ET

- Aug 16 11-Aug crude oil stocks ex. SPR w/w (-6.5m bbl, --) 1030ET

- Aug 16 Fed Reserve July 25-16 FOMC mtg minutes 1400ET

Eurodollar/Treasury option summary

Eurodollar options,

Pit/screen:

-100k EDH 81/82/83p flys, 1.5

+50k EDZ 82p, cab, ongoing buy

-10k EDH 82/85p spds, 8.5 vs. 98.47/0.40%

10k EDZ 82/83 2x1p spds, cab

+10k EDH 81/82p spds, 0.5-1.0

+5.5k EDZ 83/85/86/87p condors, 7.0

+5k EDU 80/87 R/R, 0.0p ovr

-5k EDU 85/88 R/R, 0.0p ovr

-3.5k EDF 82p vs.

EDH 81/82 2x1p spds, cab net

-3k EDV 86c, 1.0

+3k EDU 86p, 0.75

+3k EDZ 83p, 0.75

3k EDH 81/82/83p flys, 1.5

+2.5 EDZ 83/85/86c trees, 6.0

2k EDZ 86/87c spds, 2.25

+100k EOZ 80/81p spds, 2.75 vs. 98.27/0.14%

-30k E2Z 81/83 R/R, 13.5p ovr

+10k E2Z 85c, 2.5 vs. 98.04/0.10%

-4k E2U 81 straddles, 14.0-13.5

1.25k E2Z 73/76/78p flys

Tsy options

Block:

0824ET

17.6k TYX 125p, 35 vs. 126-12

Pit/screen:

+12.5k TYU 127/128c spds, 3

3.6k TYZ 129c, 14

+2.5k TYU 127/128c spds, 3

1.6k TYX 124/127+ R/R, 1p ovr

1.5k TYU 126+/127c spds, 3

1.3k TYZ 124+p, 33

1k TYV 125+ straddles, 117

-3k USU 156/157c spds, 5

2.5k TUU 108.1/108.3 R/R, 1p ovr

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

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