US TSYS: RATES SURGE AFTER ISM PMI FALLS TO 10Y LOWS (47.8)

US TSY SUMMARY: Rates bid, but off midday session highs, weak ISM mfg PMI (47.8)

helped trigger rally off lower open, while apparently spurious Brexit backstop

headlines spurred bout of risk-off unwinds in second half despite EU officials

denying reports. Yld curves bull steepened.

- Tsys opened weaker just off early London lows on heavier volumes on back of

weakest Japanese 10Y auction in three years, Chicago Fed Pres Evans in Germany

not supportive of third rate cut weighing on front end.

- Rates surged on ISM mfg miss, held gains until headlines EU considering

"time-limiting" backstop mechanism for the Irish border. GBP spiked then

reversed move as EU officials denied discussion.

- Heavier volumes belied rather thin choppy markets amid two-way month/quarterly

repositioning, bout of selling last few minutes followed by fresh round of

buying in 10s and 30s from prop and real$ accts. Nice wide range ahead Wed's ADP

private payrolls ahead Fri NFP.

- The 2-Yr yield is down 6.6bps at 1.5559%, 5-Yr is down 4.2bps at 1.5016%,

10-Yr is down 1.7bps at 1.6473%, and 30-Yr is unchanged at 2.1105%.

US TSY FUTURES CLOSE: Bid, but off midday session highs, weak ISM mfg PMI helped

trigger rally off lower open, while apparently spurious Brexit backstop

headlines spurred bout of risk-off unwinds in second half despite EU officials

denying reports. Yld curves bull steepened. Update: 

* 3M10Y  +1.278, -14.775 (L: -20.69 / H: -9.495)

* 2Y10Y  +5.059, 8.943 (L: 4.148 / H: 9.197)

* 2Y30Y  +6.434, 54.983 (L: 48.575 / H: 56.581)

* 5Y30Y  +3.892, 60.447 (L: 56.244 / H: 61.964)

Current futures levels:

* Dec 2-Yr futures up 3.875/32 at 107-27.875 (L: 107-20 / H: 107-29)

* Dec 5-Yr futures up 7.5/32 at 119-12.25 (L: 118-25 / H: 119-18)

* Dec 10-Yr futures up 9.5/32 at 130-19.5 (L: 129-20 / H: 130-29.5)

* Dec 30-Yr futures up 8/32 at 162-18 (L: 160-19 / H: 163-11)

* Dec Ultra futures up 17/32 at 192-14 (L: 188-31 / H: 193-20)

US EURODLR FUTURES CLOSE: Off session highs after a lower open, Whites-Reds

outperforming. Current White pack (Dec 19-Sep 20): 

* Dec 19 +0.035 at 98.075

* Mar 20 +0.055 at 98.385

* Jun 20 +0.060 at 98.505

* Sep 20 +0.060 at 98.585

* Red Pack (Dec 20-Sep 21) +0.055 to +0.060

* Green Pack (Dec 21-Sep 22) +0.040 to +0.050

* Blue Pack (Dec 22-Sep 23) +0.025 to +0.035

* Gold Pack (Dec 23-Sep 24) +0.015 to +0.025

US DOLLAR LIBOR: Latest settles

* O/N +0.0046 at 1.8261% (-0.0010/wk)

* 1 Month -0.0047 to 2.0108% (-0.0206/wk)

* 3 Month +0.0035 to 2.0886% (-0.0100/wk)

* 6 Month +0.0009 to 2.0565% (-0.0065/wk)

* 1 Year +0.0034 at 2.0355% (-0.0077/wk)

US SWAPS: Spds running wider by the bell -- off midday highs. Spd curve flatter

w/2Y gapping wider (highest since mid-August) in post ISM aftermath, better rate

paying in 2s-5s, Red pack block (6k +0.040) likely swap-related as well, two-way

deal-tied hedging in the mix. Current spd levels:

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

Tue 1500    +1.31/+2.31    +0.50/-3.81   +0.62/-9.69    +0.25/-39.75

1145        +2.31/+3.31    +1.06/-3.25   +0.81/-9.50    +0.50/-39.50

1030        +1.75/+2.75    +0.44/-3.88   +0.38/-9.94    +0.31/-39.69

0900        +0.94/+1.94    +0.25/-4.06   +0.69/-9.62    +0.38/-39.62

Tue Open    +0.75/+1.75    +0.38/-3.94   +0.62/-9.69    +0.38/-39.62 

Tue 0730    +1.25/+2.25    +0.56/-3.75   +0.81/-9.50    +0.56/-39.44 

Mon 1500    +0.12/+1.25    +0.38/-4.50   +0.44/-10.50   +0.69/-40.44

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

* Daily Effective Fed Funds Rate: 1.90% vs. 1.83% prior, volume: $59B

* Daily Overnight Bank Funding Rate: 1.0% vs. 1.82% prior, volume: $140B

US TSYS: REPO REFERENCE RATES: (rate, volume), Climb higher again 

* Secured Overnight Financing Rate (SOFR): 2.35% (1.82% prior), $1.097T

* Broad General Collateral Rate (BGCR): 2.35% (1.80% prior), $436B

* Tri-Party General Collateral Rate (TGCR): 2.35% (1.80% prior), $414B

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

02-Oct 0700 27-Sep MBA Mortgage Applications (-10.1%, --)

02-Oct 0800 Richmond Fed Barkin, open remarks rural economy conf

02-Oct 0815 Sep ADP private payrolls (195k, 140k)

02-Oct 0900 Philly Fed Harker opens 2nd day Comm Bank Research conf

02-Oct 0945 Sep ISM-NY current conditions (50.3, --)

02-Oct 1030 27-Sep crude oil stocks ex. SPR w/w

02-Oct 1050 NY Fed Williams, econ roundtable disc, San Diego, Ca

PIPELINE: Nextera, Marriott launched, EIB expected Wednesday

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

10/01 $1B #Nextera Energy Capital Holdings 10Y +115

10/01 $850M #MidAmerican Energy $250M 10Y tap +75, $600M 30Y +107

10/01 $550M #Marriott Int 3Y +70

10/02 $1B EIB (European Investment Bank) 10Y +21a

-

Oh Canada!

10/01 C$1B #CCDJ (Federation des Caisses Desjardins du Quebec) 5Y +105

10/01 C$1B #Enbridge Inc WNG 10Y +163

10/01 C$300M *Saskatchewan 10Y +79.5

-

$2.95B Priced Monday -- September saw record $159.13B issuance -- third all-time

highest issuance, w/43% occurring in first week (three largest issuers: $7B

Apple 5-part, $7B Disney 6-part and $5B JP Morgan 2-part).

09/30 $1.6B *Diageo Capital PLC $600M 5Y +58, $1B 10Y +80

09/30 $1.35B *American Tower $750M 7Y +115, $600M 30Y +160

Eurodollar/Tsy options: 

Eurodollar Options:

* +4,000 Mar 72 puts, 0.5 vs. 98.35/0.05%

* +6,000 short Jun88/92 call spds, 9.5 vs. 98.665/0.17%

* 7,250 short Dec 82/83 2x1 put spds on screen

* +6,000 Sep 82/83 call spds, 6.75

* +4,000 short Nov 80 puts, 1.0 vs. 98.075/0.34%

* total 25,000 (15k Blocked) Dec 83/86 1x2 call spds, cab

Block, 1011:25ET,

* -10,000 short Oct 87/88/90 call flys, 0.5 net

* +25,000 Dec 77 puts, 1.25 just prior to data

* -5,000 Nov 81 calls, 4.25

* +5,000 Oct 82/85 call spds, 1.0

* 3,450 Mar 81/85 call spds, 1.75

* 4,000 Nov/Dec 80 straddle spds, 5.0

* 3,000 Mar 90/95 call spds, 2.75

* 3,000 Mar 91/95 call spds, 1.75

* 5,500 short Dec 81/83/85 put flys, 1.0

* 3,250 Blue Dec 82 puts, 5.5

Earlier flow includes

* +10,000 Dec 82/83/85 call flys, 1.0

* +10,000 Mar 75 puts, 0.5

* +10,000 Jun 88 calls, 8.5

Relatively slow O/N picks up last few minutes, salient flow

* 22,900 Oct 82 calls, 0.5

* 10,800 Nov 85 calls, 0.75

* 5,600 Dec 82 calls, 4.0

* 10,000 short Oct 87 calls

Tsy options:

* over 10,000 TYX 129.75 puts, 22/64

* 3,300 TYX 130 puts, 27/64

* -2,000 TYZ 132 calls, 36/64

* -5,000 TUZ 107.87/108.25 call spds, 8.5

* +4,500 FVZ 120 calls, 29/64

* +5,000 TYZ 141 calls, 1/64 on screen

Highlight screen trade -- relative quiet, better put volume

* near 20,000 TYX 128/129/129.5 put trees, 5/64

* additional interest in TYX 129.5 puts pushes volume over 30k

* 3,000 USX 152/155 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$]