US TSYS: MORE RISK-OFF UNWIND THAN RISK ON

US TSY SUMMARY: Trade held more of a risk-off unwind than risk-on all day, Tsys

traded weaker all session but see-sawed off lows late. Volumes moderated (TYU

just over 1M) as Sep/Dec Tsy futures roll has run run it's course (Dec takes

lead Friday).

- Desks citing month end support for equities, improved political outlook for

Italy, while China officials said they would not retaliate to new tariffs -- but

trade tensions could spike at any time. Choppy trade after ECB's Knot, who

states that there is no need to resume QE program.

- Limited react to data, carry-over real$ selling in intermediates to long end,

modest deal-tied selling 3s, two-way in short end to intermediates ahead

extended holiday weekend in US. Early Block sale in 2s, two-way curve trade

w/buyers 3M10Y flattener unwinds. 

- Poor US Tsy $32B 7Y note auction (91288YD6) awarded 1.489% rate vs. 1.468% WI

(previous $32B 7Y awarded 1.967%); 2.16 bid/cover.

- The 2-Yr yield is up 3bps at 1.53%, 5-Yr is up 2.2bps at 1.4012%, 10-Yr is up

2.4bps at 1.5029%, and 30-Yr is down 0bps at 1.9713%.

US TSY FUTURES CLOSE: Trading weaker after the bell but well off session lows.

Volumes moderated (TYU just over 1M) as Sep/Dec Tsy futures roll has run run

it's course (Dec takes lead Friday). Update:

* 3M10Y  +1.681, -49.196 (L: -55.595 / H: -45.646)

* 2Y10Y  -0.247, -2.903 (L: -4.78 / H: -0.124)

* 2Y30Y  -2.734, 43.806 (L: 42.406 / H: 48.823)

* 5Y30Y  -2.006, 56.718 (L: 56.032 / H: 61.731)

Current futures levels:

* Sep 2-Yr futures down 2/32 at 107-24.125 (L: 107-23.625 / H: 107-27.75)

* Sep 5-Yr futures down 5.25/32 at 119-15.25 (L: 119-11.75 / H: 119-24)

* Sep 10-Yr futures down 10/32 at 131-1.5 (L: 130-26 / H: 131-17)

* Sep 30-Yr futures down 20/32 at 166-9 (L: 165-18 / H: 167-08)

* Sep Ultra futures down 1-5/32 at 196-16 (L: 195-05 / H: 198-11)

US EURODLR FUTURES CLOSE: Lower across the strip but off lows, near parallel

shift in Reds-Golds. Current White pack (Sep 19-Jun 20): 

* Sep 19 -0.015 at 97.948

* Dec 19 -0.040 at 98.130

* Mar 20 -0.050 at 98.430

* Jun 20 -0.050 at 98.580

* Red Pack (Sep 20-Jun 21) -0.045 to -0.04

* Green Pack (Sep 21-Jun 22) -0.045 to -0.04

* Blue Pack (Sep 22-Jun 23) -0.04

* Gold Pack (Sep 23-Jun 24) -0.04

MONTH-END EXTENSIONS: FINAL Bloomberg-Barclays US month-end index

extension/forecast summary compared to the average increase for the past year

and the same time in 2018; TIPS 0.12Y; Govt inflation-linked, 0.10Y

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

*US Tsys.................0.12........0.09........0.11

*Agencies...............-0.05........0.08........0.18

*Credit..................0.08........0.09........0.06

*Govt/Credit.............0.09........0.09........0.10

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

*Aggregate...............0.08........0.08........0.09

*Long Govt/Credit........0.12........0.09........0.11

*Interm Credit...........0.06........0.07........0.06

*Interm Govt.............0.09........0.08........0.09

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

*High Yield..............0.09........0.06........0.04

US DOLLAR LIBOR: Latest settles

* O/N +0.0084 at 2.0950% (+0.0067/wk)

* 1 Month -0.0118 to 2.1002% (-0.0393/wk)

* 3 Month +0.0076 to 2.1317% (-0.0126/wk)

* 6 Month -0.0037 to 2.0314% (-0.0487/wk)

* 1 Year +0.0120 at 1.9614% (-0.0672/wk)

US SWAPS: Spds mixed by the bell, spd curve flatter w/long end narrowing late

amid better receiving in 9s and 10s. Earlier 2s5s10s payer fly. Limited

deal-tied flow on day. Latest spd levels, 5Y quoted over new issue:

Time (ET)   2Y Swap/Mid    5Y Swap/Mid   10Y Swap/Mid   30Y Swap/Mid

Thu 1500    +0.81/-0.12    +0.50/-6.56   -0.25/-10.69   -0.25/-41.00

1330        +0.62/-0.31    +0.81/-6.25   +0.38/-10.06   +0.38/-40.38

1100        +0.94/+0.00    +1.19/-5.88   +0.56/-9.88    +0.12/-40.62

0900        +0.19/-0.75    +1.19/-5.88   +0.62/-9.81    +0.62/-40.12

Thu Open    +0.44/-0.50    +1.38/-5.69   +0.50/-9.94    +0.56/-40.19

Wed 1500    +0.38/-0.88    -1.50/-7.12   -1.81/-10.62   -1.50/-40.75

Wednesday recap: Spds collapse/extend inversion in second half, short end

resisting move after better rate paying in 2s-5s and light receiving in 6s and

8s earlier. More recently, two-way in 2s, receiver in 5s around 1.28804%, mixed

flys: 5s6s10s and 3s5s10s receivers, 2s3s9s, 2s4s5s and 5s7s10s payer flys.

Deal-tied selling in the mix.

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

* Daily Effective Fed Funds Rate: 2.12%, volume: $62B

* Daily Overnight Bank Funding Rate: 2.11%, volume: $167B

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

* Secured Overnight Financing Rate (SOFR): 2.12%, $1.196T

* Broad General Collateral Rate (BGCR): 2.11%, $506B

* Tri-Party General Collateral Rate (TGCR): 2.11%, $490B

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

30-Aug 0830 Jul personal income (0.4%, 0.3%)

30-Aug 0830 Jul current dollar PCE (0.3%, 0.5%)

30-Aug 0830 Jul total PCE price index (0.1%, 0.2%)

30-Aug 0830 Jul core PCE price index (0.2%, 0.2%)

30-Aug 0900 Aug ISM-Milwaukee Mfg Index (46.44, --)

30-Aug 0945 Aug MNI Chicago PMI (44.4, 47.5)

30-Aug 1000 Aug Michigan sentiment index (f) (92.1, 92.3)

30-Aug 1100 Q3 St. Louis Fed Real GDP Nowcast

30-Aug 1115 Q3 NY Fed GDP Nowcast

30-Aug 1500 Jul farm prices

PIPELINE: BNG Bank 3Y priced; $10.75B total issuance for week

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

08/29 $3B *BNG Bank 3Y +18

Chatter of coming issuance:

08-09/?? $Benchmark HSBC Bank Canada

08-09/?? $Benchmark Export/Import Bank of India

08-09/?? $Benchmark Ontario Teachers Finance Trust

08-09/?? $Benchmark T-Mobile US

08-09/?? $Benchmark KEB Hana Bank

Eurodollar/Tsy options:

Eurodollar options, Pit/screen: 

spreading the ZIRP insurance around

* +3,000 short Sep/Red Sep'20/Green Sep'21 100 call strip, paying 5.5

* -10,000 Green Mar 88/92 call spds, 11.5

* -5,000 Oct 80 puts .75 over Blue Oct 85/86 put spds

Block, 1247:55ET,

* 10,000 Green Mar 95/97 1x2 call spds, 3.0

* +15,000 Dec 77/0 put spds, 2.5 over Mar 80 puts covered

* +20,000 Nov 82/85 call spds, 6.0 vs. 98.155/0.20%

* +30,000 Oct 78 puts, 1.5 vs. 

-10,000 Oct 82/83 1x2 call strip, 16.0 vs. 12,100 EDZ 98.16

Block, 1057:54ET, call sold over

* -20,000 short Dec 80 combos, .730 vs. EDZ0 98.735/100%

* +8,000 short Sep 80 puts, cab

* +5,000 Sep 78 puts, 0.5 vs. 97.962/0.10%

* -20,000 Dec 82 calls, 12.5

* -5,000 Oct 85 calls, 2.25

* -5,000 Dec 81 calls, 17.0

* -3,000 Mar 83 puts, 17.0

* Update, +30,000 Mar 92 calls, 4.0 vs. 98.475/0.10%

* +40,000 Jan 88/93 call spds 1.75 over the 

Jan 81/82 put spds (+30k Jan 87/90 call spd 1.5 over Jan 81/82 put spd Mon)

* +15,000 Mar 92 calls, 4.0 vs. 98.475/0.10%

* 5,000 Red Dec'20 95/97 call spds, 4.5

* 5,000 short Sep 88 calls, 2.5 vs. 98.695/0.20%

* +10,000 Jun 90/92 call spds, 5.25 on legs

* -3,000 Dec 80/85 strangles, 15.25

Block, 0616-0620ET, ongoing buyer adds to appr +35k Wed at 3.5

* total +20,000 Sep 80 calls, 2.5

Tsy options:

* 3,000 TYV 129.5/131 2x1 put spds, 15/64

* +2,500 TYV 129.5/131 2x1 put spds, 13/64

* 1,000 TYV 131.5 puts, 34/64 vs. 131-24.5/0.42%

* +1,500 FVV 120 straddles, 51.5/64 earlier

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

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