US TSYS DECLINE ON RISK-OFF TRADE UNWINDS, SOFT 3-YR NOTE SALE

     US TSYS SUMMARY: Treasuries ended Monday lower, pressured by a weak 3Y

auction and risk-on mood sales after U.S. hurricanes lessened and N.Korea did

not launch weekend ICBM missile. Tsys began the day lower after overnight

reversal of last week's risk-off buying trades. (UN Sec Cncl will vote on

N.Korea Mon 6pm ET). 

- Tsys and EGBs lower. Mon had no econ. data nor Fed speakers (blackout into

Sept. 19-20 FOMC.) Morning had a 7,000-contract block buy in Tsy 10Y TYZ future

at 9:51am ET at 127-04, buy-thru. 

- Tsys declined on pre-auction shorts/sales into $24B 3Y auction, rate-lock

hedges amid $11B in high-grade corp. bond issuance. Tsys hurt by strong stocks.

Better buying in wings, while T-bills good tone; 2Y buying. Tsys slid on

post-auction redistribution sales as soft $24B 3Y auction tailed to 1.433%, only

46.16% indirects, but strong 10.4% directs, leaving large 43.4% for dealers.

Tsys unwind of 2/5Y, 2/10Y steepeners; afternoon dip buying, rate lock unwinds. 

- US SWAPS: Tighten on risk-off unwinds. 

- EURODLR FUT: Reversed Fri gain with heavy front end sales. 

- TSYS 3PM ET: 2Y 1.319%; 3Y 1.434%; 5Y 1.702%; 7Y 1.950%; 10Y 2.125%; 30Y

2.738%

US TSY FUTURES CLOSE: Held near session lows after the $24B Tsy 3Y note auction,

tentative risk-on more like unwind of last week's risk-off move w/no

developments w/N Korea over weekend (UN vote on NK sanctions today), Hurricane

Irma weakening as it moves inland. Current futures levels:

* Dec Ultra bonds down 1-28/32 at 168-17 (168-09L/170-01H)

* Dec 30-yr Bond futures down 1-12/32 at 155-29 (155-23L/156-29H)

* Dec 10-yr futures down 18/32 at 126-30 (126-29.5L/127-10H)

* Dec 5-yr futures down 10/32 at 118-16.75 (118-16.25L/118-24H)

* Dec 2-yr futures down 3.5/32 at 108-05.5 (108-05.25L/108-08.75H)

US SWAPS: Spds finish tighter, spd curve on session steeps w/long end coming off

narrows late. Short end extended tightening after 3Y auction tail, deal-tied

hedge/unwinds adding to move after earlier rate paying in 5s, 7s and 10s on

lighter size. Sources note more recent fund interest taking the other side of

recent narrowing (appr $500M nominal). Prop and fast$ accts have been waiting

for a pull back in spds that never arrived after last wk's heavy corp issuance

(appr $55B) while risk-off unwind adding to profits for accts able to hold onto

narrowers last week. OTC and exchange traded option vol lower across the curve,

better low delta put buying on day. Latest spread levels: 

* 2Y -1.81/22.00 

* 5Y -0.62/7.56 

* 10Y -0.56/-4.50 

* 30Y -0.85/-35.38

US EURODLR FUTURES CLOSE: Weaker across the strip, session lows w/heavy selling

in short end. Current White pack (Sep'17-Jun'18): 

* Sep'17 -0.012 at 98.685 

* Dec'17 -0.035 at 98.595 

* Mar'18 -0.040 at 98.535 

* Jun'18 -0.045 at 98.485 

* Red pack (Sep'18-Jun'19) -0.050-0.060 

* Green pack (Sep'19-Jun'20) -0.060-0.070 

* Blue pack (Sep'20-Jun'21) -0.065-0.075 

* Gold pack (Sep'21-Jun'22) -0.070

Eurodollar/Treasury option summary

Eurodollar options,

Blocks:

1404ET, more in pit

10k E3M 76/80 3x2p spds, 15.0 vs.

1.4k EDM'1 98.025

Pit/screen:

+10k EDH 80/82p spds vs.

EDH 85/87c spds, 2.0 net

-10k EDF 85/86 1x2c spds vs.

EDZ 83/85 2x1p spds, 4.0

8.5k EDH 82/83/85p flys

+5k EDZ 82/83 2x1p spds, 0.0

5k EDH 82/83p spds

-2.5k EDF/EDH 81/82/83/85p condors, 6.5

-2k EDV/EDX/EDZ 82/83/85/86p condor strip, 12.5

-2k EDM 93 straddles, 50.5

-2k EDF/EDH 81/82/83/85p condor strip, 6.5

-1k EDX/EDZ 82/83/85/86p condor strip, 8.5

-5k EDM'19 80p, 14.0

12k EDU'18 76p, 2.0 w/

12k EDZ'18 73p, 1.0 vs.

12k EDH'19 73p, 3.5 w/

12k EDM'19 73p, 6.0

5k EOX 82p, 2.0

4k EOZ 80/81/82 2x3x1p flys, 0.5

3k EOZ 86c, 3.0

+25k EOM 77/80/82p trees, vs. 87c, 1.0

-22k +EDM20 81 straddles vs.

E2M 78/86 strangles, 66.5 net

13k E2U 78p, cab

4k E2Z 80/82 2x1p spds, 5.0

35k E3M 76/80 3x2p spds, 15.0

7.5k E3Z 82/83/85c trees, 0.0

+5k E3F 80/E3Z 81 straddle spds, 4.0

+4k E3U 81/85c spds, 2.0

2.5k E3M 76/80 3x2p spds, 15.5

2k E3H 78/82 1x2c spds, 6.0

-2k E4V 78 straddles, 17.0

Tsy options

Pit/screen:

20k TYX 125+/126+ 2x1p spds, 5-6

+10k TYV 125.2p, 1

-2.5k TYX 126p, 17

+2k TYX 126p, 17

+2k TYV 126.7/128 R/R, 2p ovr

+10k FVV 118.2/119 strangles vs.

FVX 117.2/120 strangles, 2.5 net

+3k FVV 118p, 2.5

1.5k FVV 117.5/118/118.5p fly, 7.5

1k FVX/FVZ 117.2/117.5p spd spds, 7

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

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