US TSYS REVERSE EARLY LOSSES/FIRMER CLS, MUTED FED SPEAK REACT

By Bill Sokolis

     CHICAGO (MNI) - 

US TSYS SUMMARY

Tsy futures see-saw to mildly higher levels after slipping to near overnight

lows after the open, thin markets buffeted by deal-tied hedging and fx-acct

sales on carry-over bid for USD. 

- Sources report light two-way flow on net after large block sale of 14k TYU at

126-00 sent futures tumbling briefly. Mild prop, bank portfolio buying in short

end. FX-tied selling has evaporated.

- Little react to Fed speakers: St Louis Fed Bullard w/dovish tone, expressed

concern recent weak inflation indicators could be sign it won't return to the

Fed's 2% target anytime soon. Mn Fed Kashkari : biggest US banks are still too

big to fail.

- Rate hike probability for Dec 13 FOMC holds around 40% (MNI PINCH). 

- Corporate debt issuance returns, hedging adds to earlier weakness, swap spds

ratcheted tighter/spd curve holding flatter. Some desks fading spd narrowing in

the belly, outright and vs. the short end. 

- Option vol started off with mild bid but has slipped back to steady/lower

w/underlying off lows to steady/mixed.

US TSY FUTURES CLOSE

Mildly higher after the bell, near top end of narrow range on light volume, (TYU

w/less than 650K), all-in-all a quiet start to week, little react to rather

dovish Fed speakers Bullard and Kashkari in second half. Decent deal-tied

hedging keeping futures in range. Current futures levels:

* Sep Ultra bonds up 8/32 at 166-12 (165-25L/166-15H)

* Sep 30-yr Bond futures up 8/32 at 154-11 (153-28L/154-15H)

* Sep 10-yr futures up 3/32 at 126-05.5 (125-30L/126-07H)

* Sep 5-yr futures up 2/32 at 118-08.25 (118-03.75L/118-09H)

* Sep 2-yr futures up .5/32 at 108-05.5 (108-04.25L/108-05.5H)

US EURODLR FUTURES CLOSE

Steady in the short end to mildly higher out the strip, light volume (Red Dec'18

leads w/109k) on narrow range. Current White pack (Jun'17-Mar'18):

* Sep'17 +0.000 at 98.675

* Dec'17 +0.000 at 98.545

* Mar'18 +0.005 at 98.460

* Jun'18 +0.005 at 98.395

* Red pack (Sep'18-Jun'19) +0.005-0.010

* Green pack (Sep'19-Jun'20) +0.010

* Blue pack (Sep'20-Jun'21) +0.010-0.015

* Gold pack (Sep'21-Jun'22) +0.015-0.020

US SWAPS

Spds finish tighter, spd curve flatter with long end leading narrowing all day,

dragging short end off earlier wides due to influx of swappable supply today/wk.

Earlier, sources reported rate paying in 2s and receiving in 10s, corporate and

asset manager paying in the intermediates. Latest spread levels:

* 2Y -0.31/24.94

* 5Y -0.31/7.56

* 10Y -0.50/-3.88

* 30Y -0.88/-32.50

US OUTLOOK

Data/speaker calendar (prior, estimate):

- Aug 08 Jul NFIB Small Business Index (103.6, --) 0600ET

- Aug 08 05-Aug Redbook retail sales m/m ) (-1.2%, --) 0855ET

- Aug 08 Aug IBD/TIPP Optimism Index (50.2, --) 1000ET

- Aug 08 Jun JOLTS job openings level (5666K, --) 1000ET

- Aug 08 Jun JOLTS quits rate (2.2%, --) 1000ET

- Aug 08 US Tsy $24.0B 3-Year Note auction 1300ET

Eurodollar/Treasury option summary

Eurodollar options, 

Block:

0756ET

  +15k EOQ 81/85 strangle, 0.5 vs. 98.265/0.05%

Pit/screen:

6k EDF 81/82/83 2x3x1p flys, 1.0 net/wings ovr

-5k EDZ 86c, 2.75 vs. 98.535/0.10%

+4k EDM 85c. 7.5 vs. 98.39/0.34%

+2.5k EDX 83/85p spds, 2.25 vs. 98.545

+60k EOZ 80/81p spds, 3.25/legged

+12k EOZ 78/80/81p flys, 1.5

+5k EOZ 87c, 1.0 vs. 98.29/0.05%

-5k EOF 81 straddles, 28.0 vs.

  +5k EOH 82/86 1x2c spds, 9.0 vs.

  +2.5k EOF 77/80 3xp spds, 5.5

+2.5k EO/E2H 87c spds, 0.0

+6k E2U 77/83 R/R, 0.5c ovr

4k E2V 82/83 1x2c spds, cab

-3k E2U 81 straddles, 15.0 vs.

  +1.5k E2Q 81 straddles, 6.0

10k E3V 81/82/83/86c condors

+5k E3V 81c w/

  E3V 72/76 2x1p spds, 5.5db

     Tsy options

Pit/screen:

+10k TYZ 128c, 21 vs. 126-01/0.19%

+9k TYV/TYX 124+/127 strangle spds, 26

+2k TYU 127c, 6

-2k TYZ 127c, 36-37

-2k wk2 FV 118p, 3.5

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

[TOPICS: MTABLE]