US TSYS DIGEST 3Y, 10Y AUCTIONS; SNOOZE THRU FOMC MTG MINUTES

     US TSYS SUMMARY: US Treasuries ended Wed mixed, long end firmer after

strong $20B 10Y reopening auction and mixed $24B 3Y auction, and morning 2-way

flow, dealer-lead shorts/sales. 

- Tsys digested Sept 19-20 FOMC mtg minutes: many participants saw 2017 rate

hike warranted if conditions progressed as expected but all agreed Sept. was not

the time; several cited need to be more confident that recent inflation growth

slowdown was temporary. 

- Tsys opened NY weaker then morning early FX-tied black box buying as US$ weak;

later reverse, selling, as US dollar firmed up a bit. 

- Tsys rose amid big 10Y Tsy futures block buy of 17,556 TYZ7 at 125-10+ which

likely explained why futures jumped from 125-08 to 125-11+ around 8:35am ET;

(Wed 10Y block buy followed Tues block buy of 18,712 10Y Futrs at 125-03 at

8:39am ET.) 

- Mild corporate rate-lock hedges and busy high-grade US$ corporate issuance.

Tsys saw mild 8:42am ET buying in 10Y, 30Y and 2/10Y flatteners and 2/30Y, 5/30Y

flatteners. Tsy 10Y TYZ7 futures had 7,500 block buy around 11:07am ET at

125-11. Also Tsy 5Y futures had 12:02pm ET block sale of 6,841 FVZ7 at

117-11.75. 

- Tsy had mixed $24B 3Y auction: stopped thru mildly to 1.657% rate, reasonably

good 2.83 cover, moderate 54.3% indirects, somewhat weak 7.1% directs, 38.62%

dealers. 

- Strong $20B 10Y reopening drew 2.346% rate, very good 69.1% indirects (best

since Jan. 2017's 70.5%), 6.02% directs, small 24.87% for dealers to mop up.

- TSYS 3PM ET: 2y 1.521%; 3Y 1.644%; 5Y 1.955%; 7Y 2.174%; 10Y 2.346%; 30Y

2.877%

US TSY FUTURES CLOSE: US Tsy futures close mixed, curve flatter, weighed by 3-yr

and 10-yr Tsy supply and despite earlier block buying in 10-yr futures (+17.5k @

125-10+ & 7.5k @ 125-11). There was a decent 5-yr block sell around midday

(-6.8k @ 117-11.75). A rather muted reaction to release of Fed FOMC minutes of

19/20 meeting. Current futures levels 

* Dec Ultra bonds up 5/32 at 164-23 (164-01L/165-03H) 

* Dec 30-yr Bond futures up 2/32 at 152-18 (152-02L/152-28H) 

* Dec 10-yr futures down 0.5/32 at 125-08 (125-02L/125-11.5H) 

* Dec 5-yr futures down 1.75/32 at 117-11.25 (117-09.75L/117-14.25H) 

* Dec 2-yr futures down 1/32 at 107-24.25 (107-24L/107-25.25H)

US EURODLR FUTURES CLOSE: Future trading mixed after the bell, with white and

red contracts a touch lower, while blue and gold tick higher. Volumes have been

below 30-day average with muted reaction seen to FOMC minutes that confirmed Dec

rate hike is still on the cards. Earlier some micro-curve steepener trades going

through. Current White pack (Dec'17-Sep'18): 

* Dec 17 unch at 98.485 

* Mar 18 unch at 98.36 

* Jun 18 -0.01 at 98.255 

* Sep 18 -0.01 at 98.18 

* Reds (Dec 18-Sep 19) -0.015 to -0.01 

* Greens (Dec 19-Sep 20) -0.01 to -0.005 

* Blues (Dec 20-Sep 21) -0.005 to +0.005 

* Gold (Dec 21-Sep 22) +0.005 to +0.01

US SWAPS: Swap spreads are trading tighter at the bell. Modest flow seen in

overnight European and US session with a USD126k DV01 11Y-12Y steepener, paying

in the belly of a USD131.4k DV01 10Y-12Y-15Y Fly and a very large receiver in

the belly of a US$507,000  DV01 20Y-25Y-30Y fly. latest spread levels: 

* 2Y -0.43/25.75 

* 5Y -0.63/7.63 

* 10Y -0.04/-4.60 

* 30Y -0.06/-32.5014:40 

FOMC MINUTES: Many participants saw another 2017 rate hike as warranted if

conditions progressed as they expected, but all agreed that the September 19-20

meeting was not the time. Several cited a need to be more confident that the

recent slowdown in inflation growth was temporary, with "a few" going as far as

to need actual evidence that inflation was moving toward the 2% objective before

even considering another rate hike. They acknowledged that reaching that goal

may take longer than anticipated."

- Some saw room for further gains in labor utilization and noted that hourly

earnings growth was "subdued." Most did not assume the impact of fiscal stimulus

in their forecasts, or they downgraded any impact. The said that the storms were

likely to depress growth and raise inflation in the near-term, but that they

should have little impact in the medium-term after rebuilding commences.

Therefore, they felt it was appropriate at the September meeting to announce its

securities reduction plan, which they believed the markets were prepared for.

See MNI main wire.

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

- Oct 12 Annual IMF Meeting in Washington D.C.

- Oct 12 Sec of Tsy Mnuchin speaks at 2017 IIF Annual Mtng DC 0830ET

- Oct 12 07-Oct initial weekly jobless claims (260k/252k) 0830ET

- Oct 12 Sep Final Demand PPI (0.2%/0.4%) 0830ET

- Oct 12 Sep PPI ex. food and energy (0.1%/0.2%); trade, 0830ET

- Oct 12 08-Oct Bloomberg comfort index 0945ET

- Oct 12 Fed Gov Powell keynote on Emerg Mkts; IIF Annual Mtg; DC 1030ET

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

- Oct 12 06-Oct crude oil stocks ex. SPR w/w (-6.02M/--) 1100ET

- Oct 12 Sep Kansas City Fed LMCI 0.40/-- 1100ET

- Oct 12 Fed Gov Brainard: Rethinkg Macroecon Pol conf DC Q/A 1230ET

- Oct 12 Us Tsy $12.0B 30Y Bond Reopening auction 1300ET

- Oct 12 Sep Treasury budget balance (-$107.7B/-$1.5B) 1400ET

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

- Oct 12 Atl Fed Bostic: US Bal Sheet Normalizatn; Hong Kong Q/A 2115ET

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

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