US TSYS: RATES SURGE ON VERY LIGHT TRADE, TRADE CONCERNS?

US TSY SUMMARY: Tsys well bid after the bell, just off top end of range and more

than making up for Tue's sale. Not quite a risk-off/safe haven move despite

surge in gold >1425.0, and weaker equities (ESU9 -19.0). Tsy futures marched

steadily higher since prior to the NY open amid LIGHT volume (TYU appr 955k

after the bell), yld curves mostly flatter.

- Making the rounds late: "U.S.-China Talks Stuck in Rut Over Huawei" DJ. Not

new, but if presents a serious snag in negotiations, could spur safe haven

buying. Otherwise, quiet summer trade on anemic volume.

- Eurodollar futures well bid for the most part after the bell, at/near session

highs, short end under pressure all session, decent to heavy volume as markets

start to scale back aggressive dovish policy calls for 50bps cut at month end.

Note, 3m fra/ois SURGED 2.5 to 25.10H, past mid-May highs.

- Light deal-tied hedging, mixed swap flow with receivers in 2s, 3s and 5s after

better paying in 2s and 4s, also decent 2s5s10s receiver fly.

- The 2-Yr yield is down 2.9bps at 1.8213%, 5-Yr is down 5.2bps at 1.8162%,

10-Yr is down 5.2bps at 2.0503%, and 30-Yr is down 4.8bps at 2.564%.

US TSY FUTURES CLOSE: Remains well bid after the bell, just off top end of range

and more than making up for Tue's sale. Not quite a risk-off/safe haven move

despite surge in gold >1425.0, and weaker equities (ESU9 -15.0). Tsy futures

marched steadily higher since prior to the NY open amid LIGHT volume (TYU appr

955k after the bell), yld curves mostly flatter, update:

* 3M10Y  -1.952, -6.86 (L: -7.63 / H: -4.673)

* 2Y10Y  -2.921, 22.154 (L: 21.744 / H: 25.342)

* 2Y30Y  -2.686, 73.341 (L: 72.713 / H: 76.581)

* 5Y30Y  +0.020, 74.128 (L: 73.319 / H: 75.435)

Current futures levels:

* Sep 2-Yr futures up 1.75/32 at 107-11.625 (L: 107-09.875 / H: 107-11.875)

* Sep 5-Yr futures up 8.25/32 at 117-23.25 (L: 117-15.75 / H: 117-23.5)

* Sep 10-Yr futures up 15/32 at 127-12.5 (L: 126-31 / H: 127-13.50)

* Sep 30-Yr futures up 1-6/32 at 154-26 (L: 153-25 / H: 154-29)

* Sep Ultra futures up 1-31/32 at 176-10 (L: 174-23 / H: 176-15)

US EURODLR FUTURES CLOSE: Mostly well bid after the bell, at/near session highs,

short end under pressure all session, decent to heavy volume as markets start to

scale back aggressive dovish policy calls for 50bps cut at month end. Current

White pack (Sep 19-Jun 20):

* Sep 19 -0.010 at 97.910

* Dec 19 -0.005 at 97.985

* Mar 20 +0.015 at 98.185

* Jun 20 +0.035 at 98.290

* Red Pack (Sep 20-Jun 21) +0.040 to +0.050

* Green Pack (Sep 21-Jun 22) +0.055 to +0.065

* Blue Pack (Sep 22-Jun 23) +0.065 to +0.070

* Gold Pack (Sep 23-Jun 24) +0.070 to +0.075

US DOLLAR LIBOR: Latest settles

* O/N +0.0061 at 2.3627% (+0.0036/wk)

* 1 Month -0.0025 to 2.2978% (-0.0342/wk)

* 3 Month +0.0029 to 2.3025% (-0.0197/wk)

* 6 Month -0.0083 to 2.1987% (-0.0305/wk)

* 1 Year +0.0062 at 2.2170% (-0.0141/wk)

US SWAPS: Spds running mostly mildly wider by the closing bell, 30Y reverses to

mildly tighter in directional move w/lower Tsy ylds. Spds generally off first

half highs amid light rate receiving in 2s, 3s and 5s after better paying in 2s

and 4s, also decent 2s5s10s receiver fly. Dearth of swappable issuance

contributing to move wider. Current levels:                                     

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

Wed 1500    +0.50/3.12     +0.56/-1.38    +0.19/-6.38   -0.25/-34.88            

1345        +0.62/3.25     +0.69/-1.25    +0.31/-6.25   -0.31/-34.94            

1030        +0.44/3.06     +0.56/-1.38    +0.38/-6.19   +0.25/-34.38            

0915        +0.88/3.50     +0.75/-1.19    +0.50/-6.06   +0.38/-34.25            

Wed Open    +0.50/3.12     +0.44/-1.50    +0.44/-6.12   +0.19/-34.44            

Wed 0745    +0.62/3.25     +0.44/-1.50    +0.25/-6.31   +0.00/-34.62            

Tue 1500    -0.12/2.75     -0.19/-2.06    -0.25/-6.75   -0.12/-34.62

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

* Daily Effective Fed Funds Rate: 2.41%, volume: $64B

* Daily Overnight Bank Funding Rate: 2.40%, volume: $149B

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

* Secured Overnight Financing Rate (SOFR): 2.47%, $1.102T

* Broad General Collateral Rate (BGCR): 2.44%, $505B

* Tri-Party General Collateral Rate (TGCR): 2.44%, $474B

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

18-Jul 0830 13-Jul jobless claims (209k, 216k)

18-Jul 0830 Jul Philadelphia Fed Mfg Index (0.3, 5.0)

18-Jul 0930 Atl Fed Pres Bostic, armchair chat, Clarksville CoC, Q&A

18-Jul 1000 Jun leading indicators (0.0%, 0.1%)

18-Jul 1030 12-Jul natural gas stocks w/w

18-Jul 1300 US Tsy $4B 10Y TIPS auction (9128287D6)

18-Jul 1400 Sn VP FRBNY Goldberg, hosts policy discussion CB Research Assn

(CEBRA) NY

18-Jul 1415 NY Fed Pres Williams keynote address on MonPol (CEBRA) annual

meeting

18-Jul 1500 Policy panel "Financial Stability: lessons from the crisis" (CEBRA),

Grep Ip WSJ chief econ commentator moderates. Panelists include Harvard

Economics Prof Jeremy Stein, Brookings Inst Miriam K Carliner, Snr Economics

Fellow Nellie Liang, and Stanford Finance prof Darrell Duffie.

18-Jul 1630 17-Jul Fed weekly securities holdings

PIPELINE: Panama dual tranche launched

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

07/17 $2B Panama $1.25B +10Y +110, $750M 40Y +130

Eurodollar/Tsy options:

Eurodollar options, Pit/screen: 

* +5,000 Red Dec'20 97/100 call spds, 0.5

* +4,000 Oct 73/75/76/77 put condors, 1.25 vs. 97.995/0.08%

* another +5,000 short Aug 80 puts, 1.0 vs. 98.295/0.05%, appr +10k on day

* 20,000 long Green Jun'22 85/90 call spds, 15.0 vs. 98.24/0.14%

* 15,000 short Aug 87/90 call spds, 0.5 vs. 98.33/0.06%

* -20,000 Dec 82/86 call spds, 4.0 earlier

* +10,000 Sep 76/77/78 put flys, 2.5

* -10,000 short Aug 85 calls, 3.0

* +10,000 Sep 76/77 put spds, 1.5

* 4,000 Dec 77/80 put spds, 11.0 vs. 97.975/0.27%

* 4,000 Sep 78/80 call spds, 10.0 vs. 97.885/0.10%

* 2,000 Aug 78/80 straddle strip, 26.0

* Update, over +30,000 Dec 80/81 call spds 0.5-0.25 over the Dec 77 puts

* +25,000 Dec 80/81 call spds 0.5 over the Dec 77 puts

* -40,000 (10k Blocked) Dec 82/86 call spds, 4.0

Early screen highlights:

* 5,000 Sep 72/73 call spds

* +11,700 Dec 71/72 call spds, 12.5

* over +35,000 Dec 70/72 call spds, 25.0

* over +17,000 Dec 67/72 call spds, 50.0

Block, 0738ET ongoing seller

* -10,000 Sep 75/77 put spds, 1.5

Tsy options

* -3,000 TYQ 127 straddles, 39/64

* 1,350 TYU 128/129 call spds, 12/64

* 17,000 wk1 FV/FVQ 117.75/118 call spd spd, 2/64 net db

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

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