US TSYS: DISAPPEARING 50BP RATE CUT TRICK

US TSY SUMMARY: They did it again, another late WSJ article citing Fed officials

that "Fed officials signal 25bp cut likely at Jul meeting" hammered the short

end, reversing yesterday's post-Williams move, chances of 50BP cut falling back

to around 20%. Reminder, the Fed go into media blackout after midnight tonight,

through the July 30-31 FOMC annc.

- Was a generally quiet end to week after Thursday's policy debate-related

volatility, trading weaker but holding off early overnight lows all session.

Short end rates gapped lower after latest Fed "signal".

- Underpinning Tsys some (and rallying crude levels) were late reports that a

British oil tanker was seized in the Straight of Hormuz by Iranian forces. Note

Gold did not see any safe-haven support on ME tension, down over 20.0 in late

trade to around 1425.0.

- Thin summer market depth saw 10Y futures come under early sell pressure as

large option acct took profit on 50,000 TYU 127/129 call spds bought earlier in

the wk. The 2-Yr yield is up 5.2bps at 1.808%, 5-Yr is up 2.8bps at 1.7947%,

10-Yr is up 1.5bps at 2.0396%, and 30-Yr is up 0.7bps at 2.5712%. 

US TSY FUTURES CLOSE: Weaker after the bell but off late session lows to near

middle of session range. Much quieter than prior session, even with Fed

officials signaling 25bp likely, NOT 50bps in late trade. Yld curves reversing

much of Thu's bell steepening, update:

* 3M10Y  -0.817, -1.724 (L: -3.892 / H: 0.776)

* 2Y10Y  -3.595, 23.030 (L: 22.358 / H: 25.982)

* 2Y30Y  -4.598, 76.009 (L: 74.878 / H: 79.102)

* 5Y30Y  -2.263, 77.326 (L: 75.89 / H: 78.323)

Current futures levels:

* Sep 2-Yr futures down 2.5/32 at 107-12.75 (L: 107-11.125 / H: 107-17.125)

* Sep 5-Yr futures down 3/32 at 117-26.25 (L: 117-22.5 / H: 118-01.75)

* Sep 10-Yr futures down 3/32 at 127-17.5 (L: 127-12 / H: 127-27.5)

* Sep 30-Yr futures down 7/32 at 154-24 (L: 154-17 / H: 155-06)

* Sep Ultra futures down 10/32 at 176-1 (L: 175-23 / H: 176-20)

US EURODLR FUTURES CLOSE: They did it again, another late WSJ article citing Fed

officials that "Fed officials signal 25bp cut likely at Jul meeting" hammered

the short end, reversing yesterday's post-Williams move and chances of 50BP cut

fall back to around 20%. Current White pack (Sep 19-Jun 20):

* Sep 19 -0.055 at 97.905

* Dec 19 -0.055 at 97.990

* Mar 20 -0.040 at 98.220

* Jun 20 -0.030 at 98.325

* Red Pack (Sep 20-Jun 21) -0.03 to -0.02

* Green Pack (Sep 21-Jun 22) -0.01 to -0.005

* Blue Pack (Sep 22-Jun 23) -0.01 to -0.005

* Gold Pack (Sep 23-Jun 24) -0.01 to -0.005 

US DOLLAR LIBOR: Latest settles

* O/N +0.0014 at 2.3620% (+0.0029/wk)

* 1 Month -0.0104 to 2.2611% (-0.0709/wk)

* 3 Month -0.0183 to 2.2593% (-0.0629/wk)

* 6 Month -0.0300 to 2.1442% (-0.0850/wk)

* 1 Year -0.0344 at 2.1577% (-0.0734/wk)

STIR: Federal Reserve Bank of New York EFFR for prior session:

* Daily Effective Fed Funds Rate: 2.41%, volume: $62B

* Daily Overnight Bank Funding Rate: 2.39%, volume: $158B

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

* Secured Overnight Financing Rate (SOFR): 2.46%, $1.114T

* Broad General Collateral Rate (BGCR): 2.44%, $511B

* Tri-Party General Collateral Rate (TGCR): 2.44%, $482B

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

20-Jul Fed enters media blackout

--

23-Jul 0830 Jul Philadelphia Fed Nonmfg Index (8.2, --)

23-Jul 0855 20-Jul Redbook retail sales m/m (1.0%, --)

23-Jul 0900 May FHFA Home Price Index (0.4%, --)

23-Jul 1000 Jun existing home sales (5.34m, --)

23-Jul 1000 Jul Richmond Fed Mfg Index (3, --)

PIPELINE: Decent $22.2B priced on week, bank issuers on earnings exit

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

07/19 No new supply in the pipeline as of yet 

-

$7.7B priced Thursday, $22.2B on week

07/18 $2.5B *PNC $600M 3NC2 fix/FRN +48, $900M 3NC2 FRN +45, $1B 7Y +75

07/18 $2.5B *Bank of America 11NC10 fix/FRN +125a

07/18 $2B *Morgan Stanley 6NC5 fix/FRN +92

07/18 $700M *Comerica $500M 5Y +75, $200M 10Y +105

--

Canadian Issuance;

07/18 C$1.5B *RBC 10NC5 +132

07/18 C$800 *EIB 5Y +3

07/18 C$1.1B *Scotia Capital NHA MBS +46

Eurodollar/Tsy options:

Eurodollar options, Pit/screen: 

* +20,000 short Dec 87/92 call spds, 5.5, appr +40k on day

* 10,000 Jun 92/95 call spds, 1.5

* 2,000 Aug 80/81/82 call flys, 1.75

* 7,500 short Dec 77/80 put spds, 3.0 vs. 98.37/0.11%

* 7,500 Green Dec 78/80 put spds, 2.5 vs. 98.33/0.09%

* 3,000 Dec 77/82 strangles, 9.5

Block, 1126:45ET,

* 10,000 Aug 80 calls, 2.75

* +20,000 short Dec 87/92 call spds, 5.75/legged

* +5,000 Dec 77/78 2x1 put spds, 0.75

* +8,000 Sep 76/77/78 put flys, 2.25

* +5,000 Dec 80 straddles, 28.0 vs. 98.005/0.02% vs.

* -5,000 Jun 83 straddles, 48.5 vs. 98.34/0.04%

* +3,500 short Aug 87/88 call spds 0.5 vs. 

* -3,500 short Oct 88/90 call strip, 3.0

* +2,500 short Aug 83 straddles, 17.5

* +4,000 long Green Dec 95/97 call strip, 12.0

* 9,700 Sep 76 puts, 0.5 on screen

* 5,000 Sep 78/80/81 put flys, 2.25

* Update, appr -15,000 Aug 78 straddles, 12.0-11.5, adds to -10k Block

Block, 0925:00ET, after over -8k sold in pit at 12.0

* -10,000 Aug 78 straddles, 11.5

* +25,000 Dec 83/85 call spds, 1.5 vs. 98.015/0.08

* 5,000 Sep 77/78/80 put spds 2.25 over the Sep 81 calls

* +10,000 short Aug 82/83 2x1 put spds, 1.5

* Update, total -8,000 Aug 78 straddles, 12.0

* -8,000 Aug 78 straddles, 12.0

* +10,000 short Aug 82/83 2x1 put spds, 1.5

* 3,000 Green Mar 82/83 call spds, 2.5 over the Green Mar 77 put

Block, 0657:02ET

* +9,951 Dec 82/83/86 broken call flys, cab

Block, 0407:03ET

* -5,000 Sep 81 calls, 2.0

Tsy options, Pit/screen:

* 3,400 TYQ 127 puts, 6/64

* 2,000 wk1 TY 126.5/126.75 put spds, 4/64 vs. 127-15.5

* -1,000 TYQ 127/128 strangles, 10/64

* 1,500 TYQ 127.75/128/128.25 call strip

* 1,950 TYQ 128 calls, 6/64 vs. 127-16.5/0.24%

* -1,000 TYU 127/128.5 strangles, 45/64

* -50,000 TYU 127/129 call spds, 48- to 46/64, unwinding of 50k buy at 29/64

Tuesday, hedges weighing on TYU over last 15 minutes

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

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