US TSYS: LATE RISK-OFF ON $200B TARIFF THREAT FOR CHINA

US TSY SUMMARY: Tsys higher by the bell, near top end of range after rebounding

on late headlines Pres Trump backs $200B China tariffs as early as next wk; US$

gains vs. majors, equities fell below 2900.0. US$ strong all day, DXY +.115,

94.715 (94.469L/94.900H), $/Eur off -0.0046 1.1662, $/Yen session lows late -.66

111.02; equities weak (emini -19.0, 2895.75); Gold weaker (XAU -6.46, 1200.19);

West Texas crude firm (WTI +0.65, 70.16). 

- Rates had sold off/pared gains on positive trade headlines pre-open (EU

willing to scrap industrial, auto tariffs Politico reports) seems too good to be

true while Tsys retraced. Second day rates showed little react to in-line data:

weekly claims (213k), personal income (0.3%), total PCE price index (0.2%);

Chicago PMI Friday. Volumes tapering off as futures rolls wound down, Dec takes

lead Fri. Underlying month-end support, mixed two-way flow, positioning ahead

extended Labor Day holiday early, light deal-tied flow, spd curve flatteners and

front-end swap flies. Fast- and real$ buying intermediates, bank buys 30s late.

- Tsy cash/ylds: 2Y 99-29.75 (2.657%), 5Y 99-30 (2.762%), 10Y 100-01.5 (2.868%),

30Y 99-23 (3.013%).

US TSY FUTURES CLOSE: Trading higher near the top of the range, ongoing Sep/Dec

rollover continues, volume (TYU 1.27M), Curves mixed; update:

* 2s10s -0.097, 20.351 (19.279L/21.235H);

* 2s30s +1.105, 35.220 (33.372L/35.520H);

* 5s30s +1.252, 24.949 (23.626L/24.197H);

Current futures levels:

* Sep Ultra bonds up 13/32 at 159-03 (158-15L/159-06H)

* Sep 30-yr Bond futures up 12/32 at 144-31 (144-15L/145-00H)

* Sep 10-yr futures up 06/32 at 120-09 (120-01.5L/120-09.5H)

* Sep 5-yr futures up 04/32 at 113-17.25 (113-12L/113-17.25H)

* Sep 2-yr futures up 1.75/32 at 105-24.75 (105-22.75L/105-24.75H)

US TSY FUTURES: Late update, Sep to Dec futures roll volume winding down ahead

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 210.4k, 4.75 last; 93.7% complete, +6.2% from Wed

* FVU/FVZ appr 511.2k, 7.75 last; 93.5% complete, +8.0%

* TYU/TYZ appr 442.6k, 3.75 last; 94.8% complete, +10.9%

* USU/USZ appr 110.5k, 24.0 last; 91.4% complete, +9.3%

* WNU/WNZ appr 97.1k, 10.25 last; 93.5% complete, +6.3%

MONTH-END EXTENSIONS: *** Updated 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................0.18........0.07........0.05

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

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

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

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

*Long Govt/Credit........0.11........0.00........0.12

*Interm Credit...........0.06........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 EURODOLLAR FUTURES CLOSE: Trading higher with a parallel shift across reds

through golds. Current White pack (Sep'18-Jun'19):

* Sep'18 0.0000 at 97.6450

* Dec'18 +0.005 at 97.370

* Jun'19 +0.015 at 97.220

* Jun'19 +0.025 at 97.115

* Red pack (Sep'19-Jun'20) +0.030

* Green pack (Sep'20-Jun'21) +0.035-0.030

* Blue pack (Sep'21-Jun'21) +0.035-0.030

* Gold pack (Sep'22-Jun'22) +0.030-0.025

US DOLLAR LIBOR: Latest settles,

* O/N +0.0046 to 1.9200% (+0.0012/wk) 

* 1 Month +0.0279 to 2.1037% (+0.0310/wk) 

* 3 Month +0.0086 to 2.3212% (+0.0040/wk) 

* 6 Month +0.0063 to 2.5338% (+0.0108/wk) 

* 1 Year  +0.0093 to 2.8423% (+0.0223/wk)

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

* Secured Overnight Financing Rate (SOFR): 1.93% vs. 1.95% prior, $797B

* Broad General Collateral Rate (BGCR): 1.92% vs. 1.94% prior, $422B

* Tri-Party General Collateral Rate (TGCR): 1.92% vs. 1.94% prior, $407B

US SWAPS: Spds mostly wider by the bell, short end at top end of range lead all

session. Sporadic flow over since midmorning included two-way in 2s, spd curve

flatteners in 2s vs. 5s, 9s and 10s, misc front end flys: 2s3s5s payer fly,

3s5s10s and 4s5s10s receiver flys. Deal-tied hedging limited but noted in 2s and

3s. Latest spd levels:

* 2Y  +0.75/18.56

* 5Y  +0.62/13.81

* 10Y +0.12/7.44

* 30Y -0.12/-4.88

PIPELINE: $1B Swedish Export Credit 2Y priced

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

08/30 $1B *Swedish Export Credit 2Y +2

08/31 $Benchmark MetLife 2Y FRN SOFR +60a

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

- Aug 31 Aug ISM-Milwaukee Mfg Index (61.66, --) 0900ET 

- Aug 31 Aug MNI Chicago PMI (65.5, 63.0) 0945ET 

- Aug 31 Aug Michigan sentiment index (f) (95.3, 95.3) 1000ET 

- Aug 31 Q3 St. Louis Fed Real GDP Nowcast 1100ET 

- Aug 31 Q3 NY Fed GDP Nowcast 1115ET

Eurodollar/Treasury Option Summary

Eurodollar options, Pit/Screen:

* over +10,000 Dec 72 puts, 1.75

* +3,000 short Dec 68/70 put spds, .5 over the short Dec 72 calls

* +3,000 Green Oct 68/70/71 put flys, 3.0

* +5,000 Red Sep'19 66/67 put spds w/10,000 Red Dec19 61 puts, 6.5 total/package

* 5,000 Jun 70 Combo at 7, locals exiting the line

* 4,000 Short Oct 71 calls at 4 vs 9700.5/0.20%

* 10,000 Red Dec 61 puts at 1.5 vs 9698.5/0.06%

Tsy options, Pit/screen:

* +7,000 TYV 116.5p, cab-7

* 1,250 TYV 117.5/118.5 put spds, 6/64

* over -12,000 TYV 119.5/120 2x1 put spds, 1/64

* total -5,000 TYV 121 calls, 7/64 vs. 120-00.5/0.15%

* 1,000 USV 144.5 calls,45/64 vs. 144-04

* -10,000 TYU 119.5/120 2x1 put spds, 1/64, 1-leg sold over paper looking for

more

* 1,000 wk5 TY 120.2/120.5 1x2 call spds, 2/64 vs. 120-07/0.10%

* +7,000 wk1 10Y 120.5 calls, 6/64

* +1,000 USU 141/143 put spds, 21/64

* TYV 119.5 straddle trades 56/64 small post data

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

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