US TSYS: RATE ROUT ON STRONG DATA, TRADE TALK SCHEULED

US TSY SUMMARY: Rates doubled down on an strong risk-on first triggered early

overnight on headlines that US/China trade talks to resume in early October in

DC. 

- Rates cratered/extended the rout (30YY +.096 at 2.0659%, Aug 23 lvl) on

midmorning data: US ISM NON-MFG COMPOSITE INDEX 56.4 AUG VS 53.7 JUL and July

factory orders above-expected +1.4%. This after better than expected ADP private

employ gain of +195k ahead of Fri's non-farm data (+160 consensus) w/a handful

of economists upping their est's to +170k-180k after today's ripper.

- Equities rallied (ESU9 tapped 2986.5 high before settling in at 2977.0), while

Gold fell 44.0 to 1506.23 low before bouncing back to 1518.0 in late trade.

- Session flow included fast$ and prop acct buying lows, 3M10Y flattener unwids,

sporadic short covering through session, fast$ +10s, decent deal-tied hedging

for third consecutive session ($13.1B high grade issuance on day, $63.45B/Wk);

swap-tied buying short end, payers out the curve adding to pressure. The 2-Yr

yield is up 11bps at 1.5421%, 5-Yr is up 11.9bps at 1.4374%, 10-Yr is up 10.3bps

at 1.5687%, and 30-Yr is up 9.1bps at 2.0605%.

US TSY FUTURES CLOSE: Broadly weaker but off midmorning lows after ISM and

factory order surprise added to rout kicked off overnight on headlines that

US/China trade talks to resume in early October. Update: 

* 3M10Y  +9.037, -39.755 (L: -50.335 / H: -37.713)

* 2Y10Y  -0.715, 2.463 (L: 0.809 / H: 4.697)

* 2Y30Y  -1.964, 51.635 (L: 49.261 / H: 54.973)

* 5Y30Y  -2.87, 62.137 (L: 60.403 / H: 65.604)

Current futures levels:

* Dec 2-Yr futures down 7.75/32 at 107-30.875 (L: 107-28.50 / H: 108-06.625)

* Dec 5-Yr futures down 20.5/32 at 119-23.75 (L: 119-19.50 / H: 120-11.25)

* Dec 10-Yr futures down 1-0/32 at 131-09 (L: 131-02.5 / H: 132-07.5)

* Dec 30-Yr futures down 2-06/32 at 163-24 (L: 163-07 / H: 165-25)

* Dec Ultra futures down 3-25/32 at 194-15 (L: 193-13 / H: 197-29)

US EURODLR FUTURES CLOSE: Trading sharply lower after the bell, Reds lead

charge, Whites off midmorning lows on heavy volume. Current White pack (Sep

19-Jun 20): 

* Sep 19 -0.040 at 97.918

* Dec 19 -0.080 at 98.125

* Mar 20 -0.085 at 98.455

* Jun 20 -0.100 at 98.600

* Red Pack (Sep 20-Jun 21) -0.14 to -0.12

* Green Pack (Sep 21-Jun 22) -0.135 to -0.125

* Blue Pack (Sep 22-Jun 23) -0.125 to -0.12

* Gold Pack (Sep 23-Jun 24) -0.115 to -0.11

US DOLLAR LIBOR: Latest settles

* O/N +0.0064 at 2.0976% (+0.0080/wk)

* 1 Month -0.0151 to 2.0421% (-0.0469/wk)

* 3 Month -0.0102 to 2.1021% (-0.0355/wk)

* 6 Month +0.0013 to 1.9885% (-0.0480/wk)

* 1 Year -0.0058 at 1.8910% (-0.0830/wk)

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

* Daily Effective Fed Funds Rate: 2.13%, volume: $72B

* Daily Overnight Bank Funding Rate: 2.11%, volume: $163B

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

* Secured Overnight Financing Rate (SOFR): 2.21%, $1.222T

* Broad General Collateral Rate (BGCR): 2.20%, $524B

* Tri-Party General Collateral Rate (TGCR): 2.20%, $496B

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

06-Sep 0830 Aug nonfarm payrolls (164k, 160k)

06-Sep 0830 Aug private payrolls (148k, 150k)

06-Sep 0830 Aug unemployment rate (3.7%, 3.7%)

06-Sep 0830 Aug average hourly earnings (0.3%, 0.3%)

06-Sep 0830 Aug average workweek, all workers (34.3hrs, 34.4hrs)

06-Sep 1000 Q2 Service Revenue

06-Sep 1100 Q3 St. Louis Fed Real GDP Nowcast

06-Sep 1115 Q3 NY Fed GDP Nowcast

06-Sep 1230 Fed Chair Powell on eco-outlook, Zurich

06-Sep 1500 Aug Treasury STRIPS Holdings

PIPELINE: Ontario Teachers Fin Trust priced; $13.1B/day, $63.45B/Wk

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

09/05 $1.75B *Ontario Teachers Finance Trust 5Y +36

09/05 $2B #Standard Chartered 3NC2 fix/FRN, +120

09/05 $1.6B #Evergy $800M 5Y +105, $800M 10Y +135

09/05 $1.5B #American Honda Finance $750M +3Y fix/FRN +60, $750M 5Y +73

09/05 $1.5B #Enel Finance 5Y +125

09/05 $1.25B #Swedish Export Credit 2Y +13

09/05 $1B #Mondelez Int Holdings Netherlands $500M 3Y +67, $500M 5Y +85

09/05 $900M #Healthcare Trust of America $250M 2026 Tap +133, $650M +10Y +158

09/05 $500M #Agilent Technologies WNG 10Y +127

09/05 $600m Newmont Goldcorp 10Y +155a

09/05 $500M Air Liquide Finance WNG 10Y +100a

09/05 $Benchmark JP Morgan 6NC5 +100a, 11NC10 +130a

-

Second day heavy issuance, $30.25B total Wednesday, $50.35B/wk

09/04 $7B *Apple 5-part jumbo: $1B 3Y +35, $750M 5Y +53, $2B 7Y +68, $1.75B 10Y

+78, $1.5B 30Y +103

09/04 $3.5B *Simon Property $1B 5Y +70, $1.25B 10Y +110, $1.25B 30Y +130

09/04 $3B *Wells Fargo 3NC2 fix/FRN  +66/+65

09/04 $2.5B *Anthem Inc $850M 5Y +108, $825M 10Y +143, $825M 30Y +178

09/04 $2B *Credit Suisse Group 6NC5 +128

09/04 $2B *Coca-Cola $1B 5Y +47, $1B 10Y +67

09/04 $2B *MPLX $1B 2NC1 FRN +90, $1B 3NC1 +110

09/04 $2B *European Stability Mechanism (ESM) 5Y +19

09/04 $1.5B *Hewlett Packard $500M 18M FRN +68, $1B +3Y +90

09/04 $1.25B *MuniFin 3Y +15

09/04 $900M *Amphenol Corp 10Y +135

09/04 $750M *Georgia Power $450M 5Y +90, $350M 10Y +120

09/04 $750M *KeyCorp 10Y +110

09/04 $600M *ADB 2Y FRN SOFR +24, upsized from $500M

09/04 $500M *European Investment Bank (EIB) WNG 2022 Tap FRN SOFR +25

Eurodollar/Tsy options:

Eurodollar options, Pit/screen: 

* +6,000 Blue Mar/Red Jun 87 straddle spds, 28.0 net/E3H over

* +8,000 short Oct 83/85/86 put flys, 2.0

* 10,000 Nov 80/short Sep 85 call spds, 0.0

* 5,000 Nov 80 calls, 19.0

* +10,000 Mar 90/93 call spd w/Jun 92/96 call spd strip, 9.5

* Update, just over -100,000 Dec 75/78 call spds on screen, 32.5 -- closer,

large buyer of spd paid 5.5-6.0 back in late Feb to mid-March when Dec futures

were trading around 97.40 vs. 98.085 currently

Other salient midday trade includes

* +5,000 Dec 82/85 call spds, 6.5

* -4,000 Jan 87/90 call spds, 4.25 vs. 98.42/0.12%

* +5,000 Dec 78/80 1x2 call spds, cab, ongoing

* -5,000 Oct 82/85/87 call flys, 3.0

* -6,000 short Sep 87/90/92 call flys, 4.0

* -40,000 Dec 75/78 call spds on screen, 32.5

Block, 0927:27ET

* -10,000 Mar 72/73 2x1 put spds, cab

Block, 0851:30ET

* -20,000 Mar 68/70/71 put trees, cab

* +20,000 Mar 88/92 call spds 1.0 over Mar 80/82 put spds, adds to +40k

yesterday

* +22,500 Sep 80 calls, 1.5-1.25 vs. 97.935-.915/0.23%

* -10,000 Dec 80 puts 8.5 vs.

* +5,000 Dec 81/82 call strip, 29.0 vs.

* -5,000 Dec 83/85 call strip, 13.75

* +5,000 Red Sep/Red Dec 93/96/97/100 call condor strips, 9.5 -- adds to +15k

Blocked late Wed at 10.0

* 15,750 Jun 92/95/97 call flys, 

Tsy options:

* 5,250 TYX 127/129 put spds, 9/64 vs. 131-09

* +3,000 TYX 131.5 straddles, 1-54 to 1-55/64

* -10,000 TYV 130.5 puts, 10/64 vs. 131-22/0.10%

* appr sale 10,000 TYV 131.25 puts, 23/64 on screen, total volume >16,000

* 1,000 TYZ 128/130 put spds, 22/64

* 1,000 TYV 131.5 puts, 27/64

* +10,000 FVV/FVX 120 put spds, 13.5/64

* +5,000 FVV/FVX 119.75 put spds, 13/64

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

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