US TSYS EBB ON HEAVY HIGH-GRADE CORP SUPPLY; GOOD 3Y AUCTION

     US TSYS SUMMARY: Treasuries ended Tue lower, but mildly off session lows,

after a solid $24B 3Y sale offset corporate rate-lock tied pressure amid heavy

high-grade corporate bond issuance, such as $17.25B eight-part British America

Tobacco debt deal.

- Treasuries cut loss in early afternoon after strong 3Y auction stopped thru to

1.520%; strong 64.05% indirects, good 10.2% directs, leaving only small 25.79%

for dealers (least since Nov 2009.) 

- Tsys lifted off late morning low amid risk-off bid (somewhat due to N.Korea

nuclear worries), which helped Yen gain vs US$; earlier firm US$/yen weighed on

Tsys. Flows had modest bank portf., real$ sellers in 10Y, 30Y Tsys, prop on

small 5Y, 10Y vs. 30Y steepeners. Deal-tied hedges and pre-3-yr auction shorts

set. British Amer. Tob. cld do GBP or EUR debt Wed. Tsys had better buyers in

front end out to 5Y notes. 

- EURODLR FUTURES: Mildly lower across the strip. 

- TSYS 3PM ET: 2Y 1.639%, 3Y 1.511%, 5Y 1.834%, 7Y 2.096%, 10Y 2.282%, 30Y

2.867%.

US TSY FUTURES CLOSE: Trades weaker by the bell, well off first half lows, long

end underperforming. Brief rebound after the 3Y note auction. Rates gravitated

off late morning lows amid risk-off bid (partially tied to concerns over N Korea

nuclear capability), that in turn helped Yen regain some ground vs. USD after

latter surged couple hours ago. Current futures levels: 

* Sep Ultra bonds down 27/32 at 165-16 (165-06L/166-17H) 

* Sep 30-yr Bond futures down 18/32 at 153-24 (153-17L/154-16H) 

* Sep 10-yr futures down 5.5/32 at 126-00 (125-29L/126-07.5H) 

* Sep 5-yr futures down 3.25/32 at 118-05.25 (118-03.5L/118-08.75H) 

* Sep 2-yr futures down 1/32 at 108-04.5 (108-04.25L/108-05.5H)

US EURODLR FUTURES CLOSE: Mildly lower across the strip, near low end narrow

range on a relatively quiet, low volume day for futures. Much better volume in

Eurodollar options, puts outnumber calls, better buying for the most part

covering 4Q17 through '18. Current White pack (Jun'17-Mar'18): 

* Sep'17 -0.005 at 98.670 

* Dec'17 -0.005 at 98.540 

* Mar'18 -0.005 at 98.455 

* Jun'18 -0.005 at 98.390 

* Red pack (Sep'18-Jun'19) -0.010-0.020 

* Green pack (Sep'19-Jun'20) -0.020-0.025 

* Blue pack (Sep'20-Jun'21) -0.020-0.025 

* Gold pack (Sep'21-Jun'22) -0.020

US SWAPS: Spds are running mostly tighter after the bell, narrow range w/short

end resisting all session. Spds weighed down by another day of decent/heavy

corporate issuance. Some swap accts looking at spd curve steepeners in front end

vs. intermediates. Bear steepener in Tsys helped buoy option implieds, better

buyers low delta puts, small straddle buyers. Latest spread levels: 

* 2Y +0.25/25.44 

* 5Y -0.25/7.12 

* 10Y -0.25/-4.38 

* 30Y -0.25/-32.88

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

- Aug 09 04-Aug MBA Mortgage Applications (-2.8%, --) 0700ET 

- Aug 09 Q2 non-farm productivity (p) (0.0%, 0.8%) 0830ET 

- Aug 09 Q2 unit labor costs (p) (2.2%, 1.1%) 0830ET 

- Aug 09 Jun wholesale inventories (0.6%, --) 1000ET 

- Aug 09 Jun wholesale sales (-0.5%, --) 1000ET 

- Aug 09 04-Aug crude oil stocks ex. SPR w/w (-1.5m bbl, --) 1030ET 

- Aug 09 Jul Kansas City Fed LMCI (1.30, --) 1100ET 

- Aug 09 US Tsy $23.0B 10-Year Note auction 1300ET

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

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