US TSYS: MORE BEAR FLATTENING AHEAD MIDWEEK FOMC, HIKE EXP'D

US TSY SUMMARY: Tsys weaker by the bell, large Block buy +20k FVZ 112-10 through

-09.5 offer helps explain late drift off lows. Relative quiet ahead expected

.25bp hike from FOMC at tomorrow's annc, while continued selling in short end

has pushed chances of rate hike at year end over 90%.

- US$ still weaker but off lows (DXY slipped -.176, 94.020L); 10- and 30Y ylds

near mid-May's 4-year highs. Light deal-tied flow, sporadic month end buying.

Second leg Tsy supply $38B 5Y tailed slightly, awarded 2.997% rate vs. 2.992% WI

(awarded 2.765% in Aug; 2.522% avg), bid/cover 2.39 vs. 2.49 previous (2.50

avg). Earlier fast- and real$ selling intermediates, program selling 10s.

- Overview, while rates remain under pressure, pricing in tighter policy odds

for year end and beyond, some large option and futures plays are trading --

hedging a less aggressive Fed by year end 2019: large buying Eurodollar Dec'19

1yr midcurve upside calls funded by large selling downside puts; in futures:

over +50k EDZ19 vs. EDZ20 at 0.045. 

- Tsy cash/ylds: 2Y 99-26.5 (2.835%), 5Y 98-30.25 (2.980%), 10Y 98-03.5

(3.096%), 30Y 95-19.5 (3.229%).

US TSY FUTURES CLOSE: Trading lower, of lows on narrow range, decent volume (TYU

1.03M), curves flatter; update:

* 2s10s -1.045, 25.729 (25.356L/27.194H);

* 2s30s -1.542, 38.926 (38.673L/40.803H);

* 5s30s -0.965, 24.692 (24.592L/26.298H);

Current futures levels:

* Dec Ultra bonds down 15/32 at 153-15 (152-30L/153-20H)

* Dec 30-yr Bond futures down 12/32 at 139-28 (139-17L/140-01H)

* Dec 10-yr futures down 5.5/32 at 118-14.5 (118-11L/118-18H)

* Dec 5-yr futures down 03/32 at 112-9.75 (112-08L/112-11.5H)

* Dec 2-yr futures down 1.25/32 at 105-10.5 (105-10.25L/105-11.25H)

US EURODOLLAR FUTURES CLOSE: Trading weaker with wings outperforming the rest of

the strip, strong volume with Red Dec leading (EDZ9 395k), Current White pack

(Dec'18-Sep'19):

* Dec'18 -0.020 at 97.320

* Mar'19 -0.020 at 97.140

* Jun'19 -0.020 at 96.985

* Sep'19 -0.020 at 96.895

* Red pack (Dec'19-Sep'20) -0.040-0.025

* Green pack (Dec'20-Sep'21) -0.035

* Blue pack (Dec'21-Sep'21) -0.030-0.025

* Gold pack (Dec'22-Sep'22) -0.025-0.020

US DOLLAR LIBOR: Latest settles,

* O/N -0.0018 to 1.9162% (-0.0047/wk) 

* 1 Month +0.0118 to 2.2300% (+0.0142/wk) 

* 3 Month +0.0074 to 2.3810% (+0.0084/wk) 

* 6 Month +0.0017 to 2.5953% (+0.0033/wk) 

* 1 Year +0.0030 to 2.9118% (+0.0035/wk)

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

* Secured Overnight Financing Rate (SOFR): 1.95% vs. 1.92% prior, $799B

* Broad General Collateral Rate (BGCR): 1.94% vs. 1.90% prior, $404B

* Tri-Party General Collateral Rate (TGCR): 1.94% vs. 1.90% prior, $392B

PIPELINE: Issuance slowing into FOMC, heavy for month at $124.75B so far

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

09/25 $Benchmark ING 5Y +130a, 5Y FRN, 10Y +165a

09/25 $500M Best Buy WNG 10Y +160a

09/25 $450M Torchmark 10Y +160a

-

$2.55B Priced Monday

09/24 $800M *New York Life 2Y FRN +16

09/24 $1.75B *RBS 11NC10 fix/FRN +200

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

- Sep 26 21-Sep MBA Mortgage Applications (1.6%, --) 0700ET

- Sep 26 Aug new home sales (627k, 630k) 1000ET

- Sep 26 Aug bldg permits revision 1000ET 

- Sep 26 21-Sep crude oil stocks ex. SPR w/w 1030ET

- Sep 26 FOMC policy announcement 1400ET

- Sep 26 Summary Economic Projections press conference 1430ET

Eurodollar/Treasury Option Summary

Eurodollar options, Pit/Screen: 

* +10,000 Long Green Dec 50/55 put sprd at 2.5 vs 9675/0.05%

* +7,000 Oct 72 puts at 0.25 vs 9734/0.10%

* -4,000 Short Dec 68/70 1x2 call sprd at 1

* Total -200,000 Short Dec 67 puts at 5.5 vs 9683.5-9683/0.37% 

* Total +80,000 Long Green Dec 56/58 put sprd at 3.0-3.5 vs 9676/0.05%

Block, 11:01:00ET,

* 12,500 Dec 77 puts at 42.5

* 10,000 Short Dec 71/73 call sprd at 1.5 vs 9683/0.10%

* 10,000 Red Sep 57/60 put sprd at 3.5

* +40,000 Short Dec 72 calls at 2 vs 86.5/0.15%

* 10,000 Red Jun 58/61 put sprd at 4 vs 9676/0.10%

* 5,000 Short Oct 67 puts at 4 vs 9683.5/0.35%

* -5,000 Nov 72/73 Strangle at 1.25

* +20,000 Red Sep 58/62 put sprd at 7.5 vs 9679/0.10%

* +5,000 Short Oct 67 puts at 1.5 vs 83.5/0.23%

* -10,000 Short Nov 67 puts at 4

Tsy options, Pit/Screen:

* -5,000 TYZ 117/117.5 put spds 7/64 vs. 118-15/0.10%

* -5,000 TYX 118/119 put spds 33/64 vs. 118-13/0.25%

* 2,000 TUZ 105.1/105.2/105.3 put trees, 0.5/64

* +14,000 TYX 118 puts at 19

* 10,000 Red Jun 58/61 put sprd at 4 vs 9675/0.10%

* -3,000 USX 142.5 calls at 16

* -2,000 TYZ 118/118.5 put sprd at 14 vs 14.5/0.12%

implieds little firmer w/higher ylds, put skew

still outpace corresponding calls at moment

* -3,000 TYX 117.5/118.5 put spds, 22/64

* screen buyers TYX 118 puts, 19- to 20/64, total volume >10k

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

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