US TSYS: NOTHING "FLASHING RED" FOR ECONOMY, RISK BALANCED

US TSY SUMMARY: Curves bend mildly steeper w/long end Tsys making session lows

in late. Rates pared early bid into Fed chair Powell's second day of testimony

(House FSC). Muted react again, but US$ reversed gains/moved lower on comment

from Fed chair: "more worried by lower inflation": more of an off-hand comment

in response to what keeps him up at night as no issues "flashing red" for

economy, risks remain balanced. Futures volume remains low (TYU<725k) by the

bell. No react to data today: housing starts (-12.3% to 1.173m vs 1.32M est).

- US$ index paring strong gains: DXY +0.091 to 95.076 vs. 95.407H; US$/Yen lower

-.03 to 112.85(113.14H/112.71L); equities mildly higher (emini +5.0, 2816.0);

gold near steady (XAU +0.31, 1227.87); West Texas crude firmer/off lows (WTI

+0.80, 68.88). Muted summer trade, rates slipped as US$/GBP climb off yr-to-date

lows. Modest knock-on bid coming into session w/ Gilts after UK June inflation

surprises to the downside. Bullard Friday ahead Saturday blackout. Good option

flow, upside call buyers, 2s10s steepeners in 2s10s, deal-tied hedging front

end. Tsy cash/ylds: 2Y 99-25.25 (2.607%), 5Y 99-11 (2.766%), 10Y 100-00

(2.873%), 30Y 102-21 (2.989%)

US TSY FUTURES CLOSE: Trading mostly lower, long end at or near session lows,

light volume (TYU 723k), Curves steepening, updates:

* 2s10s +2.099, 26.154 (23.586L/26.154H);

* 2s30s +2.606, 37.595 (34.560L/37.595H);

* 5s30s +1.444, 21.966 (20.214L/22.059H);

Current futures levels:

* Sep Ultra bonds down 16/32 at 159-12 (159-12L/160-09H)

* Sep 30-yr Bond futures down 10/32 at 144-23 (144-23L/145-11H)

* Sep 10-yr futures down 02/32 at 120-02 (120-01L/120-08H)

* Sep 5-yr futures down 0.5/32 at 113-14.5 (113-13L/113-17.25H)

* Sep 2-yr futures up 0.25/32 at 105-24.75 (105-24L/105-25.25H)

US EURODOLLAR FUTURES CLOSE: Trading steady to lower throughout the strip, very

tight range with low volume, Current White pack (Sep'18-Jun'19):

* Sep'18 -0.005 at 97.535

* Dec'18 -0.005 at 97.320

* Jun'19 -0.005 at 97.185

* Jun'19 +0.000 at 97.095

* Red pack (Sep'19-Jun'20) EVEN

* Green pack (Sep'20-Jun'21) -0.005-EVEN

* Blue pack (Sep'21-Jun'21) -0.010-0.005

* Gold pack (Sep'22-Jun'22) -0.015-0.010

US DOLLAR LIBOR: Latest settles,

* O/N -0.0050 to 1.9132% (-0.0044/wk)

* 1 Month +0.0045 to 2.0862% (+0.0130/wk)

* 3 Month +0.0056 to 2.3475% (+0.0117/wk)

* 6 Month +0.0035 to 2.5266% (+0.0058/wk)

* 1 Year +0.0051 to 2.8008% (+0.0140/wk)

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

* Secured Overnight Financing Rate (SOFR): 1.92% vs. 1.95% prior, $766B

* Broad General Collateral Rate (BGCR): 1.91% vs. 1.92% prior, $392B

* Tri-Party General Collateral Rate (TGCR): 1.91% vs. 1.92% prior, $380B

US SWAPS: Spds mostly wider by the bell, spd curve flatter/short end leading

move amid late deal-tied paying ($6B BoA 3-parter after $5B IBRD 3Y fix). Spds

had inched off early narrows by late morning on better paying in 10s around

2.92-.92025%. Earlier flow included receiver in 1s at 2.6325%, ongoing fly

trade, receiver 2s5s9s after mixed fly flow coming into the session w/receiving

2s3s4s and paying 3s4s5s, 3s4s spd curve steepener. Latest spd levels:

* 2Y  +0.62/22.75

* 5Y  +0.25/14.00

* 10Y +0.25/6.75

* 30Y -0.06/-4.56

PIPELINE: $6B BoA 3-parter late launch

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

07/18 $6B #Bank of America $2.5B 6NC5 fix/FRN +110, $500M 6NC5 FRN +96, $3B

11NC10 +140

07/18 $5B *Int Bank for Reconstruction & Development (IBRD), 3Y fix MS -5

07/18 $600M *Korea Hydro 5Y +112.5

OUTLOOK: 

- Jul 19 14-Jul jobless claims (226k, 220k) 0830ET

- Jul 19 Jul Philadelphia Fed Mfg Index (19.9, 22.0) 0830ET

- Jul 19 15-Jul Bloomberg comfort index (58.0, --) 0945ET

- Jul 19 Jun leading indicators (0.2%, 0.4%) 1000ET

- Jul 19 13-Jul natural gas stocks w/w (2,203Bcf, --) 1030ET

- Jul 19 US Tsy $13B 10Y TIPS auction (CUSIP: 912828Y38) 1300ET

- Jul 19 18-Jul Fed weekly securities holdings 1630ET

Eurodollar/Treasury Option Summary

Eurodollar options, Pit/Screen:

* +11,500 Mar 70/71 put sprd at 5

* +10,000 Dec 73/75 call sprd for 0.5 over Dec 72 puts

* 5,000 Green Aug 70 Straddle at 12.5

* +15,000 Green Dec 65/66/68 put tree at 4.5 vs 9700.5/0.10%

* +7,000 Blue Dec 65/75 Strangle at 6.5

* 5,000 Green Dec 61/62 put strip vs 1.5

Block, 09:12:20ET,

* +10,000 Green Dec 78/80 call strip at 2.5, 5k in pit

* +5,000 Green Dec 78/80 call strip at 2.5

* +70,000 Dec 73/75 call sprd for 0.5 over 35,000 Green Dec 73 calls

* 10,000 Jun 77/78 call sprd at 1 vs 9712/0.10%

* -5,500 Green Mar 71/73 call sprd at 8 vs 9703.5/0.20%

* +20,000 Dec 75 calls at 2.75 vs 9733/0.20%

Block, 0720:38ET, (Block +40k EDU9 call trees Tue, 4.0)

* +40,000 Red Dec 73/77/81 call trees, 3.5 net

Tsy options, Pit/screen:

* +9,000 TUU 106/106.12 call spds vs. TUU 105.5 puts, 

* +2,500 TYQ 120.5 calls, 7/64

* 1,000 TYU 118.5/120.5/122.5 iron flys, 60/64 vs. 120-05.5/0.15%

* -5,000 FVU 113/114 call over risk reversals, 0.0

Block, 0732:30ET,

* 4,000 TYU 119/120 2x1 put spds, 10/64 vs. 120-04/0.06%

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

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