US TSYS: RATE RALLY AS US/CHINA TRADE ANGST HEATS UP

US TSY SUMMARY: US/China trade angst continues to heat up, strong risk-off bid

all session w/rates making new highs in second half; 10YY made new lows

(1.7278%, Nov'16 lvl); yld curves mostly steeper w/3M10Y the exception: after

topping +2.0 last Thursday, 3M10Y yld curve extended new inverted low of -31.995

pre-open -- level not seen since April 2007. 

- Equities sharply lower, bounce late (ESU9 -94.0 to 2838.5, 2820.50 session

low); Gold up over +21.0 around 1462.0.

- Sep FOMC 25bp rate cut fully priced in last week while 50bp cut gains surges

>35% (CME model).

- Heavy volume w/better buying across the curve, real$, fast$ bank and insurance

portfolio in intermediates to long end, two-way in 10s-30s, heavy option related

hedging, pre-auction short sets ahead Tue's 3Y note auction. Talk, but no

confirm of negative convexity acct hedging on the move. Implied vol surged early

and remained strong through the close.

- The 2-Yr yield is down 12.3bps at 1.5893%, 5-Yr is down 11.9bps at 1.5391%,

10-Yr is down 10.9bps at 1.7362%, and 30-Yr is down 9bps at 2.2919%.

US TSY FUTURES CLOSE: US/China trade angst continues to heat up, strong risk-off

bid all session w/rates making new highs in second half; 10YY made new lows

(1.7278%, Nov'16 lvl); yld curves mostly steeper w/3M10Y the exception: after

topping +2.0 last Thursday, 3M10Y yld curve extended new inverted low of -31.995

pre-open -- level not seen since April 2007, currently off lows. Update:

* 3M10Y  -6.002, -27.86 (L: -31.995 / H: -21.346)

* 2Y10Y  +1.85, 14.986 (L: 11.879 / H: 16.585)

* 2Y30Y  +4.106, 70.929 (L: 65.704 / H: 72.322)

* 5Y30Y  +3.737, 75.956 (L: 71.418 / H: 76.686)

Current futures levels:

* Sep 2-Yr futures up 8.75/32  at 107-25.375 (L: 107-16.625 / H: 107-26)

* Sep 5-Yr futures up 21/32  at 119-1.75 (L: 118-12.5 / H: 119-02.75)

* Sep 10-Yr futures up 32.5/32  at 129-28 (L: 128-27 / H: 129-29)

* Sep 30-Yr futures up 69/32  at 160-24 (L: 158-17 / H: 160-27)

* Sep Ultra futures up 108/32  at 185-17 (L: 182-03 / H: 185-23)

US EURODLR FUTURES CLOSE: Strong, all-day risk-off bid carried through the

close, heavy volume as chances of 50bp cut at Sep 18 FOMC climb over 35%.

Current White pack (Sep 19-Jun 20): 

* Sep 19 +0.090 at 98.015

* Dec 19 +0.170 at 98.215

* Mar 20 +0.190 at 98.465

* Jun 20 +0.210 at 98.60

* Red Pack (Sep 20-Jun 21) +0.20 to +0.215

* Green Pack (Sep 21-Jun 22) +0.170 to +0.190

* Blue Pack (Sep 22-Jun 23) +0.155 to +0.165

* Gold Pack (Sep 23-Jun 24) +0.150 to +0.155

US DOLLAR LIBOR: Latest settles

* O/N +0.0008 at 2.1051% (-0.2460 last wk)

* 1 Month -0.0055 to 2.2230% (-0.0040 last wk)

* 3 Month -0.0303 to 2.2090% (-0.0264 last wk)

* 6 Month -0.0471 to 2.0859% (-0.0718 last wk)

* 1 Year -0.0791 at 2.0368% (-0.0807 last wk)

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

* Daily Effective Fed Funds Rate: 2.14%, volume: $74B

* Daily Overnight Bank Funding Rate: 2.10%, volume: $185B

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

* Secured Overnight Financing Rate (SOFR): 2.19%, $1.185T

* Broad General Collateral Rate (BGCR): 2.18%, $499B

* Tri-Party General Collateral Rate (TGCR): 2.18%, $480B

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

06-Aug 0855 03-Aug Redbook retail sales m/m (4.7%, --)

06-Aug 1000 Jun JOLTS job openings level

06-Aug 1000 Jun JOLTS quits rate

06-Aug 1000 Aug IBD/TIPP Optimism Index (56.6, --)

06-Aug 1300 US Tsy $38B 3Y note auction (912828YA2)

06-Aug 1305 St. Louis Fed President Bullard at National Press Club, DC on the

economy and policy.

06-Aug 1500 Jul Treasury STRIPS Holdings

PIPELINE: Relative slow start to wk, eyes on Occidental jumbo 8-tranche

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

08/05 $1.5B #NextEra Energy Capital WNG 2Y +70

08/?? $Benchmark Occidental $11-$13B est, 8-tranche this wk, OXY funding

purchase of Anadarko Petro 

Eurodollar/Tsy options:

Eurodollar options, Pit/screen: 

* 30,000 Sep 78/80 2x1 put spds, 2.75

* +10,000 Dec 87 calls, 2.25

* Update, another +20,000 Sep 82 calls, 1.75 vs. 98.81/0.12% -- adds to >65,000

bought hedged ad on block earlier

* Update, total +60,000 Oct 78/80 put spds, 2.75 vs. 98.21/0.12%

* +20,000 Dec 90 calls, 1.5

screen trade, Lead quarterly continues to climb (EDU9 +0.090 at 98.015)

* 50,000 (27k Blocked) Oct 82/83/85 1x3x1 call flys, 6.5. Rate cut models vary,

but CME FedWatch tool assigns 35% probability of 50 bps cut at the Sep 18 FOMC,

Bloomberg model is at 44.3%.

* additional 27,000 Sep 82 calls, 1.5 on Block screen, adds to over 35,000 trade

in pit

* 10,000 Oct/Dec 77 put spds, 0.75

* 10,000 short Oct/short Dec 78 put spds, 0.50

* 15,000 Dec 80/81 call spds 3.5 over Dec 78 puts -- adds to 60k blocked at 2.25

pre-open

* Update, total +35,000 Sep 82 calls, 1.25 vs. 97.98/0.12%

* 11,000 short Sep 82/85 put spds, 5.5 on screen

* 2,000 Oct 81/82 strangles, 20.5

* 2,000 Jan/Mar 80 put spds, 1.5

* 16,250 Oct 82/85 1x2 call spds 2.5 vs. 98.17

* 6,000 Mar 90/92 call spds 8.5 vs. 98.40/0.21%  vs.

* 12,000 Dec 80/82 call spds, 12.0 vs. 98.17/0.24%

* -15,000 Dec 81/83 call spds, 10.0 vs. 98.20/0.20%

* -5,000 Oct 85 calls, 4.0

* 4,000 Aug/Sep 80 call calendar spds, 3.25

* Update, over +20,000 (pit/screen) Jun 90 calls 12.0

* +3,000 Dec 77/80 strangles, 28.5 -- implieds well bid

* +5,000 Dec 82/85 1x2 call spds, 0.75 earlier, as well as the following

* +5,000 short Mar 92/97 1x2 call spds4.5

* +10,000 Sep 76 puts, 0.5

Heavy screen trade and Block/cross volume ahead the NY open, just over 700,000

so far, highlights:

* 60,000 Aug 80 calls, 3.0

* 18,000 short Oct 83/85 put spds

* 15,000 Oct 83 calls, 5.5

Block recap:

* 120,000 Aug 78 calls, 11.5 vs. 97.985/0.89%

* 60,000 Sep 78/80 2x1 put spds 3.5 vs. 97.985

* 59,000 Sep 82 calls, 1.5 vs. 97.985

* 40,000 short Dec 81/83 put spds 4.0 over short Oct 90 calls

* 23,507 Green Mar 83/85 call spds 4.5 over Green Mar 80 puts vs. 98.575/0.21%

* 60,000 Dec 80/81 call spds 2.25 over Dec 78 puts, 40k vs. 98.145

* 15,000 Dec 80/82 call spds 12.0-13.0 vs. 22,500 Dec 78 puts, 4.5 vs.

98.17-.165

* 5,000 Dec 83/87 call spd, 5.5

Tsy options:

* 3,500 TYU 130/131call spds, 18/64

put spd buyer just as surge in underlying to new highs stalls/retreats

* +16,000 FVX 116/117 put spds, 2.5/64

* 2,000 TYU 128.5/130.5 strangles, 36/64

* 3,000 TYU 127.5 puts, 4/64 vs.

* 1,500 TYV 130 straddles, 1-57/64

* 7,000 TYV 128/133 call over risk reversals from even to 1/64

* 1,000 TYU 127/128/128.5 broken put flys, 2/64

Overnight trade and Block/cross recap:

* 20,000 TYV 128/129 put spds 7/64 over the TYU 131 calls blocked

* 15,000 TYU/TYV 131 call spds, 27/64

* 10,000 TYU 128.5 call, 1-15

* 12,500 TYU 131.5 calls, 8/64

*  6,550 FVV 118.25/118.75 put spds

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

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