US TSYS: Fed Chair Powell Tries To Dissuades Mkt Of Neg Rates

US TSY SUMMARY: Fed Chair Powell eco-outlook tried to dissuade market

anticipation of negative rate implementation in a webcast w/Peterson Institute

for International Economics.

- The Fed view on negative rates has not changed, not something we are looking

at. Couple of reasons: our tools work, now doing 13-3 facilities that work,

evidence that they work. I know there are fans of negative rates, that is an

'unsettled area', but not something we are considering.

- Tsys pared early gains on Powell stating Fed not considering negative rates as

a viable policy, but resumed the rally after Trump turned up rhetoric against

China's efforts to renegotiate trade deals.

- Eurodollar option scale buyers low delta puts to fade the stubborn negative

rate chatter (Fed fund futures in 2021 also remain stubbornly over par).

- US Tsy $22B 30Y bond auction (912810SN9) tailed: awarded 1.342% (1.325% last

month) vs. 1.335% WI; w/ 2.30 bid/cover (2.35 prior). The 2-Yr yield is down

0.2bps at 0.1569%, 5-Yr is down 1.4bps at 0.3099%, 10-Yr is down 2.2bps at

0.6428%, and 30-Yr is down 3.4bps at 1.3357%.

TECHNICALS:

US 10YR FUTURE TECHS: (M0) Still Range Bound 

*RES 4: 141-26   0.764 projection of Feb 6 - Mar 9 rally from Mar 19 low

*RES 3: 140-24   High Mar 9 and key contract high

*RES 2: 140-00   Round number resistance

*RES 1: 139-16/22  High May 8 / High Apr 22 

*PRICE: 139-07 @ 16:00 BST, May 13

*SUP 1: 138-08+/06 Low May 06 / Low Apr 15

*SUP 2: 137-16   Low Apr 7 and key near-term support 

*SUP 3: 137-12   50-day EMA

*SUP 4: 136-29+ Low Mar 24

10yr futures are unchanged and continue to trade below Friday's 139-16 high. The

failure last week to tackle key resistance at 139-22, Apr 21 high leaves price

trading within the range that has developed over the past few weeks. The

underlying theme remains bullish, however futures need to clear 139-22 to

confirm a resumption of the uptrend and target 140-00 and beyond. On the

downside, clearance of 138-08+ would be a bearish development and expose 137-16.

JGB TECHS: (M0): Testing Support

*RES 3: 156.02 - High Mar 10 and key resistance 

*RES 2: 154.56 - High Mar 13

*RES 1: 153.50 - High Mar 16

*PRICE: 152.31 @ 16:30 BST, May 13

*SUP 1: 152.15 - Low May 12

*SUP 2: 150.61 - Low Mar 19

*SUP 3: 150.00 - Psychological round number 

Any residual strength has now faded, keeping prices toward the bottom of the

recent range. Downside impetus picked up on a return back below the 152.44 mark,

which opens 151.52/150.61 as well as the psychological 150.00 handle further

out. The first upside target rests at 153.50 initially ahead of 154.56.

TSY FUTURES CLOSE: Firmer across the curve after the bell, off top end of range

on another choppy session on decent volumes (TYM>1.14M). Note 2YY crept lower:

0.1590% currently vs. last Fri's all-time low of 0.1032%. Yld curves currently

flatter. Update: 

* 3M10Y  -0.734, 52.559 (L: 48.686 / H: 53.81)

* 2Y10Y  -1.557, 48.672 (L: 47.578 / H: 50.745)

* 2Y30Y  -2.509, 118.182 (L: 115.876 / H: 120.184)

* 5Y30Y  -1.749, 102.649 (L: 100.878 / H: 104.326); Current futures levels:

* Jun 2-Yr futures up 0.625/32 at 110-8 (L: 110-07.625 / H: 110-09.375)

* Jun 5-Yr futures up 3/32 at 125-21.25 (L: 125-19 / H: 125-24)

* Jun 10-Yr futures up 8/32 at 139-6.5 (L: 139-01 / H: 139-10)

* Jun 30-Yr futures up 25/32 at 180-19 (L: 179-28 / H: 181-02)

* Jun Ultra futures up 1-22/32 at 221-29 (L: 220-15 / H: 223-04)

US TSY FUTURES: Late session roll update, 5Y continues to lead volume. Jun

futures expire in mid-late June (10s, 30s and Ultras on 6/19; 2s & 5s 6/30).

Nevertheless, starting to see pick-up in Jun/Sep futures rolling, first notice

on May 29. Session volume and % complete update:

* TUM/TUU appr 5,900 from -4.88 to -4.62, -4.75 last; <5% complete

* FVM/FVU appr 53,700 from 4.0 to 4.5, 4.25 last; <7% complete

* TYM/TYU appr 8,800 from 7.25 to 8.0, 7.75 last; <5% complete

* UXYM/UXYU 2,100 from -12.0 to -11.0, -11.75 last; <2% complete

* USM/USU <1,000 from 1-16.5 to 1-17, 1-17 last; <2% complete

* WNM/WNU 23,900 from 1-17.5 to 1-18, 1-17.75 last; <5% complete

US EURODLR FUTURES CLOSE: Steady/mixed in Whites-Reds after the bell, short end

firmer but off early highs w/mkt reluctant to unwind bets on negative rates in

near term at least. Blues through Golds outperforming. Current White pack

levels:

* Jun 20 +0.020 at 99.660

* Sep 20 +0.010 at 99.70

* Dec 20 steady at 99.690

* Mar 21 -0.010 at 99.770

* Red Pack (Jun 21-Mar 22) -0.015 to -0.01

* Green Pack (Jun 22-Mar 23) steady to +0.010

* Blue Pack (Jun 23-Mar 24) +0.020 to +0.025

* Gold Pack (Jun 24-Mar 25) +0.030 to +0.035

US DOLLAR LIBOR: Latest settles

* O/N +0.0003 at 0.0610% (-0.0001/wk)

* 1 Month -0.0002 to 0.1836% (-0.0143/wk)

* 3 Month -0.0316 to 0.3924% (-0.0422/wk)

* 6 Month +0.0165 to 0.6751% (-0.0128/wk)

* 1 Year +0.0006 to 0.7693% (-0.0135/wk)

US SWAPS: Spds running mostly wider, 10Y (quoted over new issue) holding steady

after the bell. Current spd levels:

Time(ET)   2Y Swap/Mid   5Y Swap/Mid    10Y Swap/Mid   30Y Swap/Mid

Wed 1530  +0.62/+10.44   +0.38/+2.50    +0.00/-3.75    +1.25/-48.50

1300      +0.62/+10.44   +0.38/+2.50    +0.00/-3.75    +1.50/-48.25

1100      +0.75/+10.56   +0.44/+2.56    -0.50/-4.25    +0.25/-49.50

Wed Open  -0.38/+9.44    -0.19/+1.94    -1.25/-5.00    -1.00/-49.75

Wed 0630  +0.31/+10.12   -0.12/+2.00    -0.25/-4.00    -0.50/-50.25

Tue 1600  +1.62/+9.75    +1.38/+2.12    +1.50/-3.75    +1.81/-49.44

Tuesday recap: Spds gapped wider in last few minutes, extending well past

midmorning levels as bid in Tsys returns w/equities selling off.

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

* Daily Effective Fed Funds Rate: 0.05%, volume: $88B

* Daily Overnight Bank Funding Rate: 0.04%, volume: $210B

US TSYS: REPO REFERENCE RATES (rate, volume levels reflect prior session):

* Secured Overnight Financing Rate (SOFR): 0.06%, $1.142T

* Broad General Collateral Rate (BGCR): 0.05%, $471B

* Tri-Party General Collateral Rate (TGCR): 0.05%, $446B

FED: Recap NY Fed operational purchases for Wednesday

* Tsy 7Y-20Y, $4.000B accepted, $9.596B submitted

* TIPS 7.5Y-30Y, $1.750B accepted, $2.675B submitted

-

NY Fed operational purchases schedule for Thursday ($7.25B)

* 1010-1030ET: Tsy 20Y-30Y, appr $2.25B

* 1100-1120ET: Tsy 4.5Y-7Y, appr $5B

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

14-May 0830 09-May jobless claims (3.169M, 2.50M)

14-May 0830 Apr imports price index (-2.3%, -3.2%)

14-May 0830 Apr exports price index (-1.6%, -2.3%)

14-May 1030 08-May natural gas stocks w/w

14-May 1130 US Tsy TBA 4W Bill auction  12 May Annc

14-May 1130 US Tsy TBA 8W Bill auction  12 May Annc

14-May 1300 Mn Fed Pres Kashkari, eco response to Covid-19

14-May 1500 Atl Fed Pres Bostic, Fed response to Covid-19

14-May 1630 13-May Fed weekly securities holdings

14-May 1800 Dal Fed Pres Kaplan moderated discussion

PIPELINE: $14.7B to price Wednesday, United Health 5pt jumbo lead 

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

05/13 $5B #United Health jumbo: $500M 5Y +100, $1.25B 10Y +145, $1B 20Y +160,

$1.25B 30Y +170, $1B 40Y +190

05/13 $2B #JBIC (Japan Bank for Int Cooperation) 3Y +43

05/13 $1.5B *Nordic Investment Bank 3Y +13

05/13 $1.25B *SNCF (Societe Nationale) 3Y +50

05/13 $1.2B #Entergy $600M each: 10Y +225, 30Y +250

05/13 $1B #Corteva Agriscience $500M each: 5Y +140, 10Y +170

05/13 $1B *Republic of Finland 10Y +30

05/13 $750M #Regions Financial 5Y +200

05/13 $500M *Duke Energy WNG 10Y +185

05/13 $500M *Alleghany Corp 10Y +300

Eurodollar/Tsy options

Eurodollar options

* +5,000 Jun 95/96 2x1 put spds, 1.5 vs. 99.655/0.10%

* 13,300 Mar 92/95/97 put flys

* 1,500 Sep 97/98/100 1x3x2 call flys

* Update, total 11,000 May 96 puts, cab

* +5,000 Red Jun 110.37 calls, 4.0 -- ongoing after paper +20k each EDM1 100.25

and 100.37 calls yesterday, settle 4.75 and 3.75 respectively

* total 9,000 short Sep 95/96/100/100.12 call condors with Green Sep

93/95/100/100.12 call condors for 19.5 total

* -3,000 Jun/Aug/Sep 100 call strip, 2.0 (total volume in Sep 100 calls is

13,000 after Sep 97/98/100 call tree trade earlier)

Some account scale buyers low delta puts to fade the stubborn negative rate

chatter. Note, 2YY creeping lower: 0.1549% currently vs. last Fri's all-time low

of 0.1032%. Fed fund futures in 2021 also remain stubbornly over par w/ FFN1 and

FFQ1 at 100.030.

* +2,000 Blue Sep 96 straddles, 28.0 (small Green Sep 97 straddle trades 23.0)

* +6,500 Blue Sep 90/92 put spds, 2.5 vs. 99.595/0.10%

Block, 0821:55ET 19,500 Jun 96 calls, 4.75 vs. 99.64/0.57%

Overnight trade, light volume

* 3,900 May 96 puts, 0.75

* +3,000 Dec 96/98 put spds, 16.0

* 1,500 Mar 95/100 combos or strangles

* 2,000 short Sep/Blue Sep 98/100 call spd spds, 1.0 net bull curve steepener

Tsy options:

Selling in 5Y calls adding to vol decline

* -2,700 FVM 125.5 calls, 16/64

* -5,000 FVM 125.75 calls, 10.5- to 8/64

* 5,000 FVU 126/126.5 call spds 8.5

Limited overnight trade,

* 2,000 TYN 138 puts, 30/64

* +1,000 TYM 138.5/139/139.5 call flys, 9/64 vs. 139-11/0.05%

* +1,000 wk3 TY 138.5/139/139.5 call flys, 12/64

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

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