US TSYS: HEADLINE RIRSKS BELIE WEAKER RATES ALL SESSION

US TSY SUMMARY: Carry-over weakness in rates, extending session lows later in

second half after positive sounding noise from Fox on potential US/China trade

(if you call latter willing to work out "issues ... next year"). Choppy, thin

market trade as second Fox headline re: China mentioning commerce  ministry

unwillingness to deal w/Intellectual Property protection undercut prior move,

Tsys bounced/equities pared gains.

- Other than headline risk, week opener was quiet w/limited data. Early

overnight headline that China looks to narrow scope of trade trade deal w/US as

talks resume in DC this Thursday likely triggered gap sale in equities. That

didn't explain weaker Tsys, however.

- Session flow included swap-tied buying in short end, two-way in belly, large

5Y/10Y-ultra flattener: -17,300 FVZ 119-30.75 vs. +7,000 UXYZ 143-31.5.

- Tsy auctions resume, corporate issuance gradually picking up ($15B est/wk).

Sep FOMC minutes release Wednesday afternoon. 

- The 2-Yr yield is up 6bps at 1.4637%, 5-Yr is up 3.7bps at 1.3843%, 10-Yr is

up 2.6bps at 1.5546%, and 30-Yr is up 3.1bps at 2.0464%.

US TSY FUTURES CLOSE: Near session lows on late session chop tied to mixed

US/China trade headlines ahead Thursday's negotiations in DC. Light volumes

(TYZ<1M) on an otherwise quiet week opener, largely headline risk reactions. Yld

curves mostly flatter, update: 

* 3M10Y  +0.779, -16.331 (L: -21.449 / H: -15.307)

* 2Y10Y  -3.252, 8.678 (L: 8.165 / H: 13.142)

* 2Y30Y  -2.547, 57.995 (L: 56.634 / H: 62.993)

* 5Y30Y  -0.622, 66.019 (L: 64.534 / H: 68.754)

Current futures levels:

* Dec 2-Yr futures down 4.25/32 at 108-0.625 (L: 108-00.2496000000001 / H:

108-06.25)

* Dec 5-Yr futures down 10/32 at 119-28.5 (L: 119-27.25 / H: 120-08.25)

* Dec 10-Yr futures down 13/32 at 131-16 (L: 131-13 / H: 131-31.5)

* Dec 30-Yr futures down 23/32 at 164-9 (L: 164-07 / H: 165-07)

* Dec Ultra futures down 1-7/32 at 194-25 (L: 194-22 / H: 196-21)

US EURODLR FUTURES CLOSE: Trades weaker by the bell, Whites through Reds

underperforming/near lows. Current White pack (Dec 19-Sep 20): 

* Dec 19 -0.030 at 98.140

* Mar 20 -0.055 at 98.475

* Jun 20 -0.065 at 98.595

* Sep 20 -0.070 at 98.675

* Red Pack (Dec 20-Sep 21) -0.075 to -0.065

* Green Pack (Dec 21-Sep 22) -0.06 to -0.055

* Blue Pack (Dec 22-Sep 23) -0.055 to -0.045

* Gold Pack (Dec 23-Sep 24) -0.05 to -0.04

US DOLLAR LIBOR: Latest settles

* O/N -0.0126 at 1.8082% (-0.0063 last wk)

* 1 Month -0.0372 to 1.9402% (-0.0534 last wk)

* 3 Month -0.0150 to 2.0120% (-0.0716 last wk)

* 6 Month +0.0097 to 1.96038% (-0.1123 last wk)

* 1 Year +0.0146 at 1.8677% (-0.1900 last wk)

US TSYS: *** /REPO: Reminder, NY Fed announced Daily Overnight repo operations

update last Friday, aggregate of at least $75B through Monday, November 4 now.

Meanwhile, Term repo operations will run from Mon, Oct 8 through Tue, Oct 29 as

follows:

* TERM OPERATION    MATURITY         TERM      AGGREGATE

* Tue, 10/8/2019   Tue, 10/22/2019  14-days   At least $45B

* Thu, 10/10/2019  Thu, 10/24/2019  14-days   At least $45B

* Fri, 10/11/2019  Thu, 10/17/2019   6-days   At least $45B

* Tue, 10/15/2019  Tue, 10/29/2019  14-days   At least $35B

* Thu, 10/17/2019  Fri, 11/1/2019   15-days   At least $35B

* Tue, 10/22/2019  Tue, 11/5/2019   14-days   At least $35B

* Thu, 10/24/2019  Thu, 11/7/2019   14-days   At least $35B

* Tue, 10/29/2019  Tue, 11/12/2019  14-days   At least $35B

Link to NY Fed:

https://www.newyorkfed.org/markets/opolicy/operating_policy_191004

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

* Daily Effective Fed Funds Rate: 1.82%, volume: $80B

* Daily Overnight Bank Funding Rate: 1.81%, volume: $173B

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

* Secured Overnight Financing Rate (SOFR): 1.82%, $1.094T

* Broad General Collateral Rate (BGCR): 1.79%, $454B

* Tri-Party General Collateral Rate (TGCR): 1.79%, $425B

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

08-Oct 0600 Sep NFIB Small Business Index (103.1, 102.0)

08-Oct 0830 Sep Final Demand PPI (0.1%, 0.1%)

08-Oct 0830 Sep PPI ex. food and energy (0.3%, 0.2%)

08-Oct 0830 Sep PPI ex. food, energy, trade (0.4%, 0.2%)

08-Oct 0855 05-Oct Redbook retail sales m/m

08-Oct 1000 Oct IBD/TIPP Optimism Index (50.8, --)

08-Oct 1130 $28B US Tsy 52W Note (912796TN9) auction

08-Oct 1300 $38B US Tsy 3Y Note (912828YK0) auction

08-Oct 1335 Chi Fed Evans, moderated Q&A, Q&A

08-Oct 1430 Fed Chair Powell NABE Conf, Denver 

08-Oct 1700 Mn Fed Kashkari, St Cloud townhall, Q&A

PIPELINE:  Waiting on $4.25B total high-grade to price

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

10/07 $1.5B #TD Bank $1.15B +3Y +53, $350M 3Y FRN L+53

10/07 $1B #PepsiCo 30Y +92

10/07 $750M #WEA Finance +7Y +143

10/07 $500M #DR Horton 5Y +112.5

10/07 $500M *Keysight WNG 10Y +145

In the works:

10/08 $1B BNG Bank 5Y +20a

10/08 $400M IADB 3Y SOFR+26a

10/08 $Benchmark Dexia 5Y +42a

10/08 $Benchmark IFC (International Finance Corp) 5Y +12

10/08 $Benchmark JBIC (Japan Bank for International Cooperation) 3Y +37a, 5Y

+44a, 10Y +57a

10/?? $Benchmark Rep of Italy, first $ bond sale since 2010, $3B est

10/?? $Benchmark Industrial Bank of Korea

10/?? $1.1B OCI 5NC2

Eurodollar/Tsy options: 

Eurodollar Options:

Block, 1342:55ET,

* 20,000 Sep 93/96/97/100 call condors, 3.5

* +4,000 Blue Jan 87 straddles, 33.5

* +/-4,000 Blue Jan 86 straddles, 33.0

* +1,500 Red Mar 87 straddles, 66.0

* -1,500 Green Jan 87 straddles, 3.5

* 1,000 Green Mar 87 straddles, 41.0

Block, 0929:00ET,

* +10,000 Dec 86 calls, 1.0

* -19,750 Mar 90 calls 0.5 over Feb 87/91/95 call flys

* -3,500 Dec 78/80/81 put trees, 3.75

Block, 0915:25-:40ET, roll-up and out

* -20,000 Nov 82 calls, 4.25 (adds to earlier Block sale)

* +40,000 Dec 86 calls, 1.25 vs. 3,200 EDZ9 98.15

* -5,000 short Oct 86/87/88 call trees, 5.5

* -4,000 Oct 80/81/82 call trees, 10

* +2,500 Dec 82/83/86 call trees

Earlier screen trade

* 20,000 Nov 78/80 put spds, 1.5 adds to 40k Block

* -30,000 Mar 92 calls, 2.5 on screen ahead the open

* 10,000 short Oct 90 calls, 0.5

Block, 0710:12ET,

* -5,000 Dec 80 puts, 4.0 vs. 98.16/0.25%

Large Overnight Blocks:

EDX9 98.25 Call (ref 98.17, 35%d), sold at 5 in 20k

EDX9 98.00/97.875 Ps (ref 98.17, 13%d), bought for 1.5 in 40k

EDV9 98.125 Put (ref 98.17, 32% delta sold at 1 in 26k

Tsy options:

Block, 0927:50E

* -7,000 TYZ 132 calls, 50/64 on screen/adds to Block

Block, 0927:50ET,

* -13,634 TYZ 132 calls, 50/64

* +2,000 TYX 130/131 2x1 put spds, 9

* +1,000 TYX 131.5 straddles, 110

* +2,100 FVX 119.5 puts, 10/64

* -4,500 wk2 US 163.5 puts, 20-21

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

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