US TSYS: FED POWELL, STEADY AS SHE GOES, LITTLE POLICY INSIGHT

US TSY SUMMARY: Tsys trade mildly weaker by the close w/long end support

evaporating late; curves still flatter however. Consider 2s10s yield curve now

flatter than the Japanese Yen 2s10s curve at 21.5. But don't worry: "inferring

economic causality from statistical correlations" isn't appropriate according to

FOMC minutes and needs to be considered along with other economic data.

- Gist of Fed Chair Powell speech from Jackson Hole: economy robust with little

concern of overheating, gradual hikes appropriate if growth continues, inflation

stable little/risk of accelerating above 2%. Equities liked it, S&Ps +17.0 at

2875.0; US$ index receded, DXY -.517, 95.149, $/Eur gained +0.0085 1.1625, while

$/Yen off -.09 111.20. Gold surged after Thu's sell-off (XAU +20.22, 1205.77);

West Texas crude adding to midweek rally (WTI +0.72, 68.55). 

- Heavy Tsy futures volume (TYU>1.7M) due to surge in Sep/Dec roll activity

(TYU/TYZ>775k); Sep Tsy option expiry added to pick-up in flow. Otherwise late

summer torpor continued, little new positioning w/rate hike chances steady

(Sep>90%, Dec>60%). Tsy cash/ylds: 2Y 99-31.7 (2.624%), 5Y 100-03.75 (2.722%),

10Y 100-13.5 (2.824%), 30Y 100-16 (2.974%).

US TSY FUTURES CLOSE: Trading slightly lower into the bell, over futures volume

inflated due to heavy rollover action (TYU 1.74M), Curves flatter as 2s10s break

below 20 and 5s30s fall below 25; update:

* 2s10s -0.835, 19.745 (19.081L/21.457H);

* 2s30s -1.225, 34.760 (33.840L/36.495H);

* 5s30s -0.730, 24.864 (24.377L/25.892H);

Current futures levels:

* Sep Ultra bonds down 02/32 at 159-31 (159-10L/160-11H)

* Sep 30-yr Bond futures down 02/32 at 145-19 (145-03L/145-26H)

* Sep 10-yr futures down 02/32 at 120-17 (120-11.5L/120-19H)

* Sep 5-yr futures down 1.75/32 at 113-22.25 (113-19L/113-23.5H)

* Sep 2-yr futures down 01/32 at 105-25.75 (105-24.75L/105-26.25H)

US TSY FUTURES: Late update, Sep to Dec futures roll volume ballooning. First

notice date: August 31. September future's staggered expiration on September 19

for 10s, 30s and Ultras, and September 28 for 2s and 5s. Latest volume:

* TUU/TUZ appr 344.8k from 3.5-4.25, 3.75 last;

* FVU/FVZ appr 446.9k from 7.25-7.75, 7.5 last;

* TYU/TYZ appr 740.8k from 3.5-4.0, 3.75 last; 

* USU/USZ appr 139.4, 23.5 last;

* WNU/WNZ appr 202.3k, 10.5 last;

MONTH-END EXTENSIONS: *** Bloomberg-Barclays US month-end index extensions

compared to the average increase for the past year and the same time in 2017.

TIPS ext -0.03Y, real -0.03Y; Govt inflation-linked, -0.04Y

*.....................Projected...1Y Avg Incr..Last Aug

*US Tsys.................0.11........0.06........0.11

*Agencies................0.19........0.07........0.05

*Credit..................0.06........0.04........0.09

*Govt/Credit.............0.10........0.05........0.10

*MBS.....................0.08........0.05........0.06

*Aggregate...............0.09........0.05........0.09

*Long Govt/Credit........0.10........0.00........0.12

*Interm Credit...........0.05........0.04........0.07

*Interm Govt.............0.09........0.02........0.09

*Interm Govt/Cred........0.08........0.02........0.08

*High Yield..............0.04........0.01........0.08

US TSY OPTIONS: *** Sep options expire Friday, open interest below as of Thu's

settle below. Options 0.5 tic ITM (0.25 tic for 5-, 2-yr opt's) are

auto-exercised.

*            Calls      Puts      Total  Nearest-the-Money Strike Totals

*Sep 30yr   365,019   313,666    678,685  144.50 w/ 15,632 (9,798c, 5,834p)

*                                         145.00 w/ 33,191 (23,748c, 9,443p)

*                                         145.50 w/ 15,042 (12,368c, 2,674P)

*Sep 10yr 1,094,278 1,127,707  2,221,985  120.00 w/ 185,910 (117,904c, 68,006p)

*                                         120.50 w/ 108,941 (79,141c, 29,800p)

*                                         121.00 w/ 122,900 (116,386c, 6,514p)

*Sep 5yr    355,340   782,679  1,138,019  113.50 w/ 80,509 (51,412c, 29,097p)

*                                         113.75 w/ 30,154 (19,483c, 10,671p)

*                                         114.00 w/ 50,267 (47,145c, 3,113p)

*Sep 2yr    169,100   101,901    271,001  105.88 w/ 25,910 (17,505c, 8,405p)

*                                         106.00 w/ 45,944 (43,005c, 2,939p)

US EURODOLLAR FUTURES CLOSE: Trading slightly lower across the strip in the top

half of a tight range. Current White pack (Sep'18-Jun'19):

* Sep'18 -0.0075 at 97.6475

* Dec'18 -0.010 at 97.395

* Jun'19 -0.015 at 97.250

* Jun'19 -0.015 at 97.150

* Red pack (Sep'19-Jun'20) -0.020-0.015

* Green pack (Sep'20-Jun'21) -0.020-0.015

* Blue pack (Sep'21-Jun'21) -0.020-0.010

* Gold pack (Sep'22-Jun'22) -0.015

US DOLLAR LIBOR: Latest settles,

* O/N +0.0007 to 1.9188% (+0.0019/wk) 

* 1 Month +0.0080 to 2.0727% (+0.0033/wk) 

* 3 Month +0.0059 to 2.3172% (+0.0053/wk) 

* 6 Month +0.0069 to 2.5230% (+0.0122/wk) 

* 1 Year  +0.0080 to 2.8200% (+0.0070/wk)

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

* Secured Overnight Financing Rate (SOFR): 1.94% vs. 1.90% prior, $773B

* Broad General Collateral Rate (BGCR): 1.92% vs. 1.89% prior, $420B

* Tri-Party General Collateral Rate (TGCR): 1.92% vs. 1.89% prior, $403B

US SWAPS: Spds hold mildly wider for the most part by the bell, short end

reversing early widening by midday. Light session flow includes peppering of fly

activity last couple hours: 2s5s6s and 8s9s10s payer flys, 2s5s10 ad 4s5s10s

receiver flys. No deal-tied hedging on the day. Latest spd levels:

* 2Y  -0.09/18.12

* 5Y  +0.46/13.38

* 10Y +0.50/7.75

* 30Y +0.75/-4.75

PIPELINE: $1.25B priced Thursday, $3.75B on week

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

No new issuance Friday

-

$1.25B Priced Thursday

08/23 $1.25B #JP Morgan 2NC1 FRN L+23

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

- Aug 27 Aug Dallas Fed manufacturing index (32.3, --) 1030ET

- Aug 27 US TSY $45B 26W BILL Auction (912796QL6) 1130ET

- Aug 27 US TSY $51B 13W BILL Auction (912796PT0) 1130ET

- Aug 27 US TSY $36.000 BLN 2Y NOTE Auction (9128284Y3) 1300ET

Eurodollar/Treasury Option Summary

Eurodollar options, Pit/Screen:

* 10,000 Dec 71 puts at 0.5 vs 9738.5/0.10%

* 10,000 Mar 68/70/71 at 2 vs 9728/0.10%

* +7,000 Mar 70/75 call over risk reversal at 2 vs 9725/0.40%

* 5,500 Long Green Sep 57/60 2x1 put sprd at 0

Block, 1042:15ET, appears to be a sale

* -22,500 Green Dec 68 puts, 7.0 vs. 7,400 Green Dec'20 97.007

* -5,000 Mar 70/72/75 Iron Fly at 16.5

* -3,000 short Oct 70 puts, 6.0

* -10,000 68/70 2x1 put sprd at 2

* +4,000 Jan 71/73 call over risk reversal at 1 vs 9724.5/0.62%

* +3,000 Short Sep/Short Dec 67/68/70 put fly at 1 EOU over

* -6,500 Short Sep 70 puts at 1 vs 9712.5/0.10%

* just over 28,000 Red Mar20 78 calls, outright and vs. 73 calls on 1x2

Tsy options, Pit/screen (Sep options expire Friday)

* 1,000 TYV 119.5/121 strangles 21/64 vs. 120-14.5

* 1,100 TYZ 121/122/123 call flys, 8/64

* 1,000 wk1 TY 120.5 calls 19/64 vs. 3,300 TYX 122.5 calls, 11/64

* -11,000 TYX 122 calls at 13 vs futs 8.5

* -5,000 TYV 120.5/121.5 call sprd at 16

* -3,500 TYX 118.5/122.5 call over risk reversal at 3 vs 15.5/0.27%

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

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