US TSYS: PRE-ECO SUMMIT FED SPEAK UNDERSCORE MID-CYCL ADJUST

US TSY SUMMARY: Underscoring mid-cycle adjustment -- rates add to mid-week sale

-- see-sawing near session lows after the bell. Curves mixed, with 2Y10Y

drifting around inverted levels. Heavy futures volume due to surge in Sep/Dec

rolling: TYU>1.8M, FVU>1.1M.

- Short end near low end of range as market pricing of "mid-cycle" policy

adjustment solidifies over more aggressive rate cuts after hearing from Fed

spkrs' George and Harker earlier. 

- Mkt eager for more clarity from myriad Fed speakers including Fed Chair Powell

at Jackson Hole econ summit tomorrow. Agenda to be posted tonight at 2000ET on

KC site: https://www.kansascityfed.org/

- Equities buffeted earlier, sold off in partial react to Fed Harker comments,

weaker than expected IHS Markit PMI/Manufacturing sub-50 at 49.9, as well as

German headline saying "BUNDESBANK SEES NO NEED FOR GERMAN FISCAL STIMULUS" Bbg.

- The 2-Yr yield is up 3.9bps at 1.6121%, 5-Yr is up 2.3bps at 1.4962%, 10-Yr is

up 2.4bps at 1.6131%, and 30-Yr is up 3.6bps at 2.1081%.

US TSY FUTURES CLOSE: Underscoring mid-cycle adjustment -- rates add to mid-week

sale -- see-sawing near session lows after the bell. Curves mixed, with 2Y10Y

drifting around inverted levels. Heavy futures volume due to surge in Sep/Dec

rolling: TYU>1.8M, FVU>1.1M. Update: 

* 3M10Y  +0.764, -37.997 (L: -43.089 / H: -35.782)

* 2Y10Y  -0.811, 0.172 (L: -0.867 / H: 2.97)

* 2Y30Y  +0.527, 49.81 (L: 47.732 / H: 51.231)

* 5Y30Y  +1.591, 61.309 (L: 58.441 / H: 61.447)

Current futures levels:

* Sep 2-Yr futures down 2.625/32  at 107-21.25 (L: 107-21 / H: 107-25.25)

* Sep 5-Yr futures down 4.25/32  at 119-2.25 (L: 118-31.5 / H: 119-10.25)

* Sep 10-Yr futures down 7.5/32  at 130-9.5 (L: 130-04 / H: 130-23.5)

* Sep 30-Yr futures down 26/32  at 164-0 (L: 163-23 / H: 165-07)

* Sep Ultra futures down 1-29/32  at 191-25 (L: 191-19 / H: 194-09)

US TSY FUTURES: *** Late update Sep/Dec roll, inflating otherwise moderate

summer volumes (TYU>1M, FVU>600k). First notice date (Dec futures take lead) on

August 30. Sep future's staggered expiration on September 19 for 10s, 30s and

Ultras, and September 30 for 2s and 5s. Update:

* TUU/TUZ appr 336,800 from -8.38 to -7.75, -8.12 last; 22% complete

* FVU/FVZ appr 258,000 from -14.0 to -13.25, -13.5 last; 19% complete

* TYU/TYZ appr 210,800 from -20.75 to -19.75, -20.5 last; 13% complete

* USU/USZ appr 50,200 from 24.5 to 25.25, 24.75 last; 15% complete

* WNU/WNZ appr 78,600 from -1-0.25 to -30.25, -31.25 last; 18% complete

US EURODLR FUTURES CLOSE: Weaker across the strip, short end near low end of

range as market pricing of "mid-cycle" policy adjustment solidifies over more

aggressive rate cuts after hearing from Fed spkrs' George and Harker earlier.

Mkt eager for more clarity from myriad Fed speakers including Fed Chair Powell

at Jackson Hole econ summit tomorrow. Current White pack (Sep 19-Jun 20): 

* Sep 19 -0.023 at 97.933

* Dec 19 -0.045 at 98.135

* Mar 20 -0.045 at 98.40

* Jun 20 -0.050 at 98.515

* Red Pack (Sep 20-Jun 21) -0.045 to -0.035

* Green Pack (Sep 21-Jun 22) -0.03 to -0.025

* Blue Pack (Sep 22-Jun 23) -0.025 to -0.02

* Gold Pack (Sep 23-Jun 24) -0.03 to -0.025

US DOLLAR LIBOR: Latest settles

* O/N +0.0006 at 2.0936% (-0.0049/wk)

* 1 Month -0.0213 to 2.1452% (-0.0270/wk)

* 3 Month -0.0154 to 2.1322% (-0.0037/wk)

* 6 Month +0.0172 to 2.0425% (+0.0258/wk)

* 1 Year +0.0190 at 1.9732% (+0.0281/wk)

US SWAPS: Spds mostly wider by the bell, short end extending inversion after

collapsing late Wed, long end holding wider but keeping to narrow range over

past week. Muted flow on day after light rate receiving in 1s, 5s and 9s early,

receivers in 2s and 3s in second half. Latest spd levels:

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

Thu 1500    -1.03/-1.00    +0.65/-4.75   +0.95/-8.25    +0.75/-38.75

1300        -0.60/-0.56    +0.51/-4.88   +0.95/-8.25    +0.75/-38.75

1130        -0.40/-0.36    +0.59/-4.80   +0.85/-8.35    +0.75/-38.75

0930        -0.40/-0.36    +0.57/-4.82   +0.70/-8.50    +0.75/-38.75

Thu Open    -0.40/-0.36    +0.35/-5.05   +0.57/-8.63    +0.70/-38.80

Wed 1500    -1.56/-0.50    -0.69/-5.50   +0.38/-9.31    +0.50/-39.62

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

* Daily Effective Fed Funds Rate: 2.13%, volume: $55B

* Daily Overnight Bank Funding Rate: 2.10%, volume: $174B

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

* Secured Overnight Financing Rate (SOFR): 2.10%, $1.188T

* Broad General Collateral Rate (BGCR): 2.08%, $521B

* Tri-Party General Collateral Rate (TGCR): 2.08%, $498B

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

23-Aug 0800 Fed Chair Powell, Challenges for MonPol, Jackson Hole Economic

Policy Symposium

23-Aug 0900 Jul bldg permits revision

23-Aug 1000 Jul new home sales (646k, 649k)

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

23-Aug 1115 Q3 NY Fed GDP Nowcast

PIPELINE: Nothing new in pipeline Thursday after $15.75B priced through

Wednesday

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

$4.1B Priced Wednesday

08/21 $3.5B *World Bank 5Y +13

08/21 $600M *EBRD 3Y SOFR +26, upsized from $500M

----- Canada issuance:

08/21 C$500M *Quebec 10Y +65.5

08/21 C$300M *Nova Scotia 30Y bond +88.5 

Eurodollar/Tsy options:

Eurodollar options, Pit/screen: 

* +55,000 Oct 82 calls, 9.0 on screen

* +10,000 Red Sep 87 calls, 22.5

* +12,000 short Dec 80/81/87 call trees, 2.0

Block, 1301:10ET, adds to buyer in pit earlier

* +10,000 Mar 95 calls, 1.5, still offered

* +20,000 Mar 90 calls, 5.5 vs. 98.41/0.10%

Conditional bear curve plays two-way on net

* 20,000 Sep 78/short Sep 83 put spds, 0.0 for bear curve flattener after a

separate global macro put on a Mar'20/Green Mar'22 steepener

* +21,000 Oct 82/Dec 83 call spds, 0.5

* -20,000 Mar 90/95 call spds, 4.0

* -4,000 Sep 77/78 put spds, 1.0

* -5,000 Sep 78 puts, 1.5

* +10,000 Dec 82 calls, 12.5

* +5,000 Sep 90 calls, 1.5 vs. 98.64/0.10%

* -20,000 Mar/Green Mar 73/76 put spd spd, 0.0 net for conditional bear curve

steepener

* -3,000 Jun 80 puts, 5.5

* +17,000 Mar 90/92 1x2 call spds, 0.0

Block, 0834:57ET

* +10,000 Jun 77/78/80 put trees, 0.0

* 5,000 short Sep 90 calls, 1.5

Screen trade just ahead NY open

* +50,000 Oct 82 calls, 9.0 adds to +5k block earlier -- ongoing: open interest

climbed 255,157 in the call strike yesterday on volume of 520,561. Portion of

October calls bought vs. Dec 82 on 1x2 basis with another 25,000 Dec 82 calls on

screen today

Tsy options:

Adding to the nether end of Dec 5Y risk/high-yld insurance

* buyer of some 45,000 FVZ 109 puts at cab-7. Open interest in the Dec 5y 108,

108.25 and 108.5 puts all between 40-45k coming into the session. THat said,

it's highly unlikely these sub-cab options are being bought to hedge risk of a

move in 5Y yld before December to around 3.80%. More likely risk manager

mandated to cover off-balance sheet risk or collateral management, one desk

adds: "cheaper to buy the put than to post cash for margin."

Reminder, September quarterly options expiration follows today's settle. FINAL

CME Group open interest and ATM data as of Thu's close: 

           Calls       Puts      Total   Nearest-the-Money Strike Totals

Sep 30yr  149,152    186,636    335,788   140 w/ 25,246 (17,636c, 7,610P)

                                          141 w/ 16,284 (14,460c, 1,824P)

Sep 10yr  659,659    992,359  1,652,018   125.5 w/ 158,043 (83,631c, 74,412p)

                                          126 w/ 114,806 (64,461c, 50,345p)

                                          126.5 w/ 72,985 (57,951c, 15,034p)    

Sep 5yr   172,100    426,991    599,091   119.25 w/ 32,730 (15,301c, 17,429p)

                                          119.50 w/ 61,887 (21,254c, 40,633p)

                                          119.75 w/ 30,566 (16,456c, 14,110p)

Sep 2yr    22,194     31,736     53,930   109.88 w/ 14,321 (9,827c, 4,494p)

                                          110 w/ 964 (764c, 200p)

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

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