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

Eurodollar/Treasury option summary

Eurodollar options,

Block:

0936ET, more in pit

-20k E2U 80/82 R/R, 0.5 -c

0941ET, more in pit

+20k EOU 82/83 R/R, 1.0 +p

Pit/screen:

+17k EDQ/EDU 88c spds, cab

+8k EDU 85/86/87/88p condors, 11.5 w/

+E2U 77/78/82/83p condors, 10.5

7k EDF 82p vs. EDH 82/83 2x1p spds, 0.5

5k EDZ 83/85 2x1p spds vs. EDV 85p, 0.75db

3k EDZ 83/85p spds vs. 86c

2k EDV/EDX 85/86 strangle spd, 2.0

2k EDU 85/86/87/88c condors, 12.0

1k EDM 80/81/82p flys, 1.5

1k EDH 82/83/85p flys, 3.0

+35k EOZ 80/81p spds, 3.0, adds to +60k Mon

10k EOQ 83c

7.5k EOZ 77/80p spds

+7k EOU 82/83 R/R, 1.0 +p, 20k Blck'd

5k EOV 81/83 2=x1 R/R, 2.5

-5k EOF 81 straddles, 28.0 vs.

+5k EOH 82/86 1x2c spds, 9.0 vs.

+2.5k EOF 77/80 3x2p spds, 5.5, adds to Mon

4k EOZ 78p, 1.5

2k EOZ 77/78/80p flys, 1.0

-7k E2U 80/82 R/R, 0.5 -c, 20k Blck'd

-2.2k E2Q/E2U 81 straddle spds, 9.5

2k E2Z 85c, 2.5 vs. 98.07/0.10%

-7k E3Z 75/78 2x1p spds, 7.0 vs. 98.895/0.15%

5k E3H 70/72p spds

3k E3Z/E3H 71 2x1p spds, 1.0

2k E3Z 67/72p spds, 1.5 vs. 97.865

1.5k E3H 70/72p spds

1k E3Z 67/72p spds

Tsy options

Pit/screen:

-11k TYU/TYX/TYZ 1x1.15x1c tree, 0.0/Z ovr

+10k TYZ 125p, 6

3k TYV 123/124p spds, 6

2.86k TYU 125+/126 1x2c spds, 3

+1k TYZ 125+/126 straddle strip, 424

1k TYU 124p, 2

1k TYU 124/125 2x1p spds, 3

6.5k FVU 116+p, 0.5

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

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