US TSYS HIGHER: POST-5-YR AUCTN BID, FX-TIED BID, SHORT-COVER

     US TSYS SUMMARY: Treasuries ended Mon higher after strong $34B 5Y auction,

FX-tied bid (weak US$/yen), short-cover. Tsys began NY mixed, ebbed into 11:30am

ET $26B 2Y auction (1.345% rate, mildly weak 45.8% indirects, OK 12.56 directs,

41.6% dealers.) 

- But Tsys receded more amid post-auction 2Y redistribution sales, pre-5yr

setup, so had concession into 5Y auction. Five-year sale was strong: it drew

1.742% rate, solid 69.1% indirects, very strong 13.5% directs, leaving a record

low since 2009, 17.5%, for primary dealers. Next: Tues 1pm ET US$28B 7Y auction.

- Tsys action muted amid UK bank holiday, vacation-thinned trading volume. Tsys

flows quiet if you take away the heavy Sep/Dec roll volume (TYU/TYZ over 1Mln

earlier) and auction hedging. Mkts had little/no react second tier data. 

- Traders awaited Friday key Aug. jobs; MNI poll:180K median est. Tsys 2Y notes

saw 2way flow. US 2Y swap spd: large $450M 2Y swap receiver trade at 2.050% at

14:50pm ET, also approx $182M 5Y payer from 1.7930%-1.7995% at 10:02-10:03am ET;

then mild 3/4/5Y ratio spread fly. Eurodlr futures steady in the wings; 

- TSYS 3PM ET: 2Y 1.334%; 3Y 1.454%; 5Y 1.742%; 7Y 1.977%; 10Y 2.159%; 30Y

2.752%

US TSY FUTURES CLOSE: Mildly higher, off top end of range. Quiet start to the

new week w/London out on 1-day bank holiday. Tsy flows muted if you take away

the heavy Sep/Dec roll volume (TYU/TYZ over 1.2M) and Tsy note auction hedging.

Little/no react to second tier data. Participants sidelined ahead Fri's Aug NFP

180k. Current futures levels: 

* Sep Ultra bonds up 1/32 at 169-02 (168-11L/169-08H) 

* Sep 30-yr Bond futures up 6/32 at 156-23 (156-05L/156-26H) 

* Sep 10-yr futures up 3.5/64 at 126-31.5 (126-25.5L/127-00H) 

* Sep 5-yr futures up 2.5/32 at 118-20.75 (118-16.5L/118-21.5H) 

* Sep 2-yr futures up .5/32 at 108-07.5 (108-06.5L/108-07.75H)

US SWAPS: One of the larger receiver trades in a string of smaller front end

receiver flows helping keep spd curve steeper today. Spds have narrowed across

the board belly lagging. 

* $450M 2Y swap, 2.0500% at 1450ET. Early session flow remains light, appr $182M

5Y payer from 1.7930-1.7995% at 1002-1003ET, followed modest 3s4s5s ratio spd

fly. OTC and exchange traded option implieds lower across the curve. Latest

spread levels: 

* 2Y -1.38/21.50 

* 5Y +0.00/4.62 

* 10Y -0.06/-5.31 

* 30Y -0.75/-35.31

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

- Aug 29 26-Aug Redbook retail sales m/m (-0.2%, --) 0855ET

- Aug 29 Jun Case-Shiller Home Price Index (+0.1, --) 0900ET

- Aug 29 Aug Conference Board confidence (121.1, 121.7) 1000ET

- Aug 29 Aug Dallas Fed services index (10.5, --) 1030ET

- Aug 29 US Tsy $28.0B 7-Year Note auction 1300ET

Eurodollar/Treasury option summary

Eurodollar options,

Pit/screen:

+25k EDZ 82p, cab, ongoing

+4.25k EDF 81/82/83 2x3x1p flys, 1.0/wings over

+2k EDZ 86/87c spds, 2.5 vs.

-EOZ 85/86c spds, 2.0

+10k EOF 82/83c spds vs. EOF 81p, 1.5 net

+5k EOU 85c, 1.5

+22k E2Z 81/82/83/85c condors, 3.5

+10k E2X 75/76/77/78p condors, 1.0

8k E3H 72/87 strangles, 5.0

Tsy options

Block:

0801ET

-12k TYV 127.2c, 14 vs. 126-27.5/0.30%

Pit/screen:

-15k TYV 127c, 20-21

+7k TYV 126.7/127+c spds, 3

5k TYV 125+/127+ strangle, 18 vs

5k TYZ 123/130 strangles, 17

4.2k TYZ 129c, 19

-4k TYX 128+c, 14

+3.5k TYZ 127c, 52

1.5k TYV 128c, 7

1k TYV 125+/TYX 126p spds, 27

1.05k TYV/TYX 125+ 1x2p spds, 38

1k TYV 128/129+c spds, 1

1.5k wk1 TY 126p, 2

1.5k TYV 126+ straddles, 60

1k TYZ 126+/127+/129c flys, 4

+6.2k FVV 116p, 0.5

2k FVX/FVZ 118.2 straddle spds, 13.5/Dec ovr

1.3k FVV 115+/116+ 2x1p spds, 0.0

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

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