US TSYS: RISK METRICS BACK/REALITY RETURNS

US TSY SUMMARY: Tsys reverse Mon's late decline, Iranian Pres Rouhani would only

entertain talks w/DC if sanctions sanctions lifted; Beijing denied claims they

nor US called to discuss trade deal (out Mon but nobody wanted to hear it).

- Tsy futures surged early, continued into second half before running out of

momentum. Heavy volume tied to ongoing Sep/Dec rolling. 2Y10Y yld curve slipped

to new 12+ year inverted low. $40B 2Y note auction (91288YC8) awarded a 1.516%.

- Eurodollar futures bid across much of the strip after the bell, upper half of

session range, short end underperforming but well off early lows. Short end came

under pressure along w/short Sterling on headlines re: UK sees Brexit maneuver

room after Gr Merkel/Fr Macron talks.

- Flow: pre-auction short sets in 2s, deal-tied selling in 3s-7s, fast- and

real$ two way in belly to long end, bank buying in long end vs. prop selling.

Yld curve steepener unwinds as curves bear flatten, 3M10Y off Mon's new 12.5y

low while 2Y10Y extended inversion, new 12.5Y low compares to -20.0 in Nov'06

and -56.0 in Apr'00. 

- The 2-Yr yld down 1.7bps at 1.5223%, 5-Yr down 3bps at 1.3876%, 10-Yr down

5.1bps at 1.4845%, and 30-Yr down 7.2bps at 1.9634%.

US TSY FUTURES CLOSE: Reverse Mon's late decline -- Tsy futures surged early,

continued to claw higher into the second half (still off Mon's early O/N

all-time low, 30YY fell to 1.9521%) -- before running out of momentum. 30YY

bounced "on air" to 1.9754%. Heavy volume tied to ongoing Sep/Dec rolling. 2Y10Y

yld curve slipped to new 12+ year inverted low. Update: 

* 3M10Y  -4.372, -49.531 (L: -51.29 / H: -45.112)

* 2Y10Y  -3.492, -4.102 (L: -5.163 / H: -0.143)

* 2Y30Y  -5.538, 43.884 (L: 42.684 / H: 49.987)

* 5Y30Y  -4.133, 57.527 (L: 56.624 / H: 62.323)

Current futures levels:

* Sep 2-Yr futures up 1.375/32 at 107-25.25 (L: 107-23.25 / H: 107-26.125)

* Sep 5-Yr futures up 5.5/32 at 119-16.5 (L: 119-12.25 / H: 119-19.5)

* Sep 10-Yr futures up 11/32 at 131-4 (L: 130-27 / H: 131-09.5)

* Sep 30-Yr futures up 1-12/32 at 166-15 (L: 165-06 / H: 166-27)

* Sep Ultra futures up 2-17/32 at 196-24 (L: 194-06 / H: 197-14)

US TSY FUTURES: *** Second half Sep/Dec roll volume update -- % complete should

be over 75% by Wednesday. First notice date (Dec futures take lead) Friday,

August 30. Sep future's staggered expiration on September 19 for 10s, 30s and

Ultras, and September 30 for 2s and 5s. Update:

* TUU/TUZ appr 1,400,700 from -8.75 to -8.0, -8.38 last;

* FVU/FVZ appr 1,713,200 from -14.75 to -13.75, -14.25 last;

* TYU/TYZ appr 1,604,100 from -21.75 to -20.75, -21.25 last;

* UXYU/UXYZ appr 260,800 from -21.0 to -20.25, -21.0 last;

* USU/USZ appr 310,800 from 24.75 to 25.25, 24.75 last;

* WNU/WNZ appr 314,000 from -1-01.25 to -30.5, -30.5 last;

US EURODLR FUTURES CLOSE: Bid across much of the strip after the bell, upper

half of session range, short end underperforming but well off early lows. Short

end came under pressure along w/short Sterling on headlines re: UK sees Brexit

maneuver room after Gr Merkel/Fr Macron talks. Current White pack (Sep 19-Jun

20): 

* Sep 19 +0.010 at 97.958

* Dec 19 steady at 98.175

* Mar 20 +0.025 at 98.480

* Jun 20 +0.030 at 98.615

* Red Pack (Sep 20-Jun 21) +0.035 to +0.045

* Green Pack (Sep 21-Jun 22) +0.045 to +0.050

* Blue Pack (Sep 22-Jun 23) +0.045 to +0.050

* Gold Pack (Sep 23-Jun 24) +0.050 to +0.055

MONTH-END EXTENSIONS: Updated Bloomberg-Barclays US month-end index

extension/forecast summary compared to the average increase for the past year

and the same time in 2018; TIPS 0.12Y; Govt inflation-linked, 0.10Y

*.....................Projected...1Y Avg Incr..Last Year

*US Tsys.................0.12........0.08........0.11

*Agencies...............-0.05........0.07........0.18

*Credit..................0.08........0.09........0.06

*Govt/Credit.............0.09........0.09........0.10

*MBS.....................0.05........0.07........0.06

*Aggregate...............0.08........0.08........0.09

*Long Govt/Credit........0.12........0.10........0.11

*Interm Credit...........0.06........0.08........0.06

*Interm Govt.............0.09........0.08........0.09

*Interm Govt/Cred........0.08........0.08........0.08

*High Yield..............0.09........0.09........0.04

US DOLLAR LIBOR: Settles resume

* O/N +0.0074 at 2.0957% (-0.0102 last wk)

* 1 Month -0.0237 to 2.1158% (-0.0327 last wk)

* 3 Month -0.0270 to 2.1173% (+0.0087 last wk)

* 6 Month -0.0426 to 2.0375% (+0.0634 last wk)

* 1 Year -0.0792 at 1.9493% (+0.0834 last wk)

US SWAPS: Spds running tighter after the bell, session lows amid moderate

deal-tied flow. Latest spd levels:

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

Tue 1500    -1.00/-1.75    -0.69/-5.69   -0.75/-8.69    -0.38/-39.12

1200        -0.62/-1.38    -0.56/-5.56   -0.75/-8.69    -0.62/-39.38

1000        +0.38/-0.38    +0.12/-4.88   +0.19/-7.75    +0.81/-37.56

Tue Open    +0.19/-0.56    +0.44/-4.56   +0.44/-7.50    +1.00/-37.75

Mon 1500    +0.06/-0.94    +0.19/-5.06   +0.25/-8.25    +0.38/-38.75

Monday recap: Spds running mildly wider, spd curve steepening out w/long end off

early narrows. Light flow on net, receivers in 2s and 3s, payers in 5s

(1.3589%), 4s5s7s receiver fly. Deal-tied flow absent. 

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

* Daily Effective Fed Funds Rate: 2.12%, volume: $64B

* Daily Overnight Bank Funding Rate: 2.10%, volume: $171B

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

* Secured Overnight Financing Rate (SOFR): 2.10%, $1.190T

* Broad General Collateral Rate (BGCR): 2.08%, $502B

* Tri-Party General Collateral Rate (TGCR): 2.08%, $481B

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

28-Aug 0700 23-Aug MBA Mortgage Applications (-0.9%, --)

28-Aug 1030 23-Aug crude oil stocks ex. SPR w/w

28-Aug 1220 Fed Barkin, West Virginia Chamber of Commerce

28-Aug 1300 US Tsy $41B 5Y note auction (91288YE4)

28-Aug 1730 SF Fed Daly, Res Bank of New Zealand/IMF conf on inflation

targeting. Q&A

PIPELINE: EIB looks to price $3B 3Y

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

08/26 $3B European Investment Bank (EIB) 3Y +11

08/26 $Benchmark Japanese Finance Org for Municipalities (JFM) 5Y +48a

08/26 $Benchmark KFW 5Y +15a

Chatter of coming issuance:

08-09/?? $Benchmark HSBC Bank Canada 

08-09/?? $Benchmark Export/Import Bank of India

08-09/?? $Benchmark Ontario Teachers Finance Trust

08-09/?? $Benchmark T-Mobile US

08-09/?? $Benchmark KEB Hana Bank

-

$750M Priced Monday; C$1.5B 

08/26 $750M *Texas Instruments 10Y +75

08/26 C$1.5B CIBC 5Y sr +112

Eurodollar/Tsy options:

Eurodollar options, Pit/screen: 

* +15,000 Oct/Dec 86 call spds, 3.5

* -10,000 short Jun 87/92 call spds, 18.5

* -5,000 Oct 83 calls, 5.5

* +3,500 Sep 82 calls, 0.5

* +3,500 Dec 82/83 call spds vs. -7,000 Dec 77 puts, even net/package

* Update, appr +30,000 Red Dec'20 100 calls, 2.5 vs. 98.66/0.06%

* +10,000 Sep 80/81 call spds, 2.0

* +5,000 Nov 86/90 call spds, 2.5

* +7,500 Jun 88/90 call strip, 30.0 vs. 98.61 ref

* -5,000 Dec 80/81 put spds, 6.0 vs. 98.155/0.12%

* 35,000 Dec 80/81 put spds, 6.0 vs. 98.165/0.12%

* +28,000 Jan 87/90 call spds 1.0 over Jan 81/82 put spds, adds to 50,000

package bought Mon at 1.5

* +5,000 Mar 88/92 call spds, 5.5

* +5,000 Red Dec'20 93/95/96 call flys, 3.0

* +10,000 Dec 86 calls, 5.0 vs. 98.16/0.19%

* +20,000 Mar 91/96 call spds, 4.0 vs. 98.455/0.11% (bought 2 weeks ago, same

lvl vs. 98.47)

* -5,000 Oct 81/82 put over risk reversals, 0.75 vs. 98.165/.80%

* +15,000 Red Dec'20 100 calls, 2.5 vs. 98.695/0.06%

Other pit trade after the bell

* 2,500 Mar 87/90/93 call flys, 1.0 net

* +3,000 Jun 77/78/80 put trees, 0.0

* 500 Sep 78/80/81/82 call condors, 5.5 vs.

* 1,000 Dec 81/82/83/85 call condors, 2.25

Tsy options:

* 2,000 TYV 130.5/132.25 1x2 call spds, 27/64 vs. 131-11/0.10%

* 3,000 TYX 127/129 put spds, 9/64

* 1,000 TYV 131.5/132 strangles, 1-13/64

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

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