US TSYS: RISK-OFF BEGETS CURVE INVRSN BEGETS RECESSION CARES

US TSY SUMMARY: While rate cut chances moderated some on Tue's late risk-on

move, multiple domestic and foreign risk factors (curve inversion spurring

renewed recession worries, US/China trade, slowing global economy, sharp equity

sell-off, etc) has chances of rate cuts back on the rise (50bp cut at Sep 18

FOMC >55%).

- Decent volumes but not heavy volumes, typical for thin summer trade is

exacerbating moves, headlines exceptionally problematic. Tsys well bid across

the curve, just off late session highs amid decent volume (TYU>1.9M), yld curves

flatter all session w/2Y10Y joining 3M10Y in inverted territory (new 12+ year

lows). 30YY dropped to new all-time low of 2.0139% earlier; WNU triggered level

1 circuit breaker (+3 pts) after the open (194-06).

- Two-way flow w/better real$, bank and insurance buying intermediates to long

end, steepener unwinds, growing roll volume, heavy 2-way option volume, wing

buyers (puts fading rate rally, fear of ZIRP spurring upside call buying)

- The 2-Yr yield is down 8.3bps at 1.5832%, 5-Yr is down 8.5bps at 1.499%, 10-Yr

is down 11.6bps at 1.5877%, and 30-Yr is down 13.4bps at 2.0295%.

US TSY FUTURES CLOSE: Well bid across the curve, just off late session highs

amid decent volume (TYU>1.9M), yld curves flatter all session w/2Y10Y joining

3M10Y in inverted territory (new 12+ year lows). 30YY dropped to new all-time

low of 2.0139% earlier; WNU triggered level 1 circuit breaker (+3 pts) after the

open (194-06). Update:

* 3M10Y  -8.488, -37.127 (L: -41.898 / H: -30.436)

* 2Y10Y  -3.038, 0.248 (L: -1.917 / H: 4.917)

* 2Y30Y  -4.499, 44.628 (L: 41.515 / H: 52.679)

* 5Y30Y  -4.515, 53.254 (L: 51.964 / H: 61.106)

Current futures levels:

* Sep 2-Yr futures up 4.625/32 at 107-23.375 (L: 107-18.125 / H: 107-25)

* Sep 5-Yr futures up 9.75/32 at 119-2.25 (L: 118-21.75 / H: 119-08)

* Sep 10-Yr futures up 19/32 at 130-13.5 (L: 129-21 / H: 130-22)

* Sep 30-Yr futures up 1-26/32 at 164-24 (L: 162-15 / H: 165-07)

* Sep Ultra futures up 3-20/32 at 194-26 (L: 190-02 / H: 195-15)

US TSY FUTURES: *** Sep/Dec 5Y leads late roll volume. First notice date (Dec

futures take lead) on 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 41,300 from -7.62 to -6.88, -7.25 last, 10% complete;

* FVU/FVZ appr 62,400 from -13.5 to -12.75, -13.25 last, 8% complete;

* TYU/TYZ appr 13,400 from -20.0 to -18.75, -19.75 last, 5% complete;

* USU/USZ appr 1,700 from 25.25 to 25.5, 25.25 last, 3% complete;

* WNU/WNZ appr 16,400 from -29.75 to -26.25, -29.25 last, 4% complete

US EURODLR FUTURES CLOSE: Well bid across the strip but off top end of range.

While rate cut chances moderated some on Tue's late risk-on move, multiple

domestic and foreign risk factors (curve inversion/recession worries, US/China

trade, slowing global economy, equity sell-off, etc) has chances of rate cuts

back on the rise (50bp cut at Sep 18 FOMC >55%). Current White pack (Sep 19-Jun

20): 

* Sep 19 +0.045 at 97.990

* Dec 19 +0.065 at 98.185

* Mar 20 +0.075 at 98.445

* Jun 20 +0.080 at 98.555

* Red Pack (Sep 20-Jun 21) +0.075 to +0.080

* Green Pack (Sep 21-Jun 22) +0.070

* Blue Pack (Sep 22-Jun 23) +0.070 to +0.075

* Gold Pack (Sep 23-Jun 24) +0.075 to +0.085

US DOLLAR LIBOR: Latest settles

* O/N -0.0061 at 2.0921% (-0.0032/wk)

* 1 Month +0.0022 to 2.1973% (+0.0030/wk)

* 3 Month +0.0103 to 2.1684% (-0.0072/wk)

* 6 Month +0.0459 to 2.0798% (+0.0279/wk)

* 1 Year +0.0589 at 2.0290% (+0.0411/wk)

US SWAPS: Spds holding mostly tighter/inverted levels, short end bucking

move/rebounding back to positive territory amid better payer flow in 2s around

1.57137%. 5s as well from 1.42955-1.42304%, two-way in 10s has better receivers;

mixed flys in 2s5s10s. Latest spd levels:

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

Wed 1500    +2.31/1.06     -0.38/-6.19   -0.94/-11.00   -1.38/-40.38

1300        +2.12/0.88     -0.44/-6.25   -1.00/-11.06   -1.19/-40.19

1145        +1.62/0.38     -0.38/-6.19   -1.06/-11.12   -1.19/-40.19

1000        +1.38/0.12     -0.25/-6.06   -1.06/-11.12   -0.75/-39.75

Wed Open    +1.00/-0.25    -0.19/-6.00   -0.62/-10.69   -0.75/-39.75

Tue 1500    +0.00/-0.94    +0.31/-6.19   +0.94/-10.06   +0.94/-39.00

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

* Daily Effective Fed Funds Rate: 2.12%, volume: $66B

* Daily Overnight Bank Funding Rate: 2.11%, volume: $174B

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

* Secured Overnight Financing Rate (SOFR): 2.16%, $1.183T

* Broad General Collateral Rate (BGCR): 2.16%, $528B

* Tri-Party General Collateral Rate (TGCR): 2.16%, $501B

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

15-Aug 0830 10-Aug jobless claims (209k, 212k)

15-Aug 0830 Jul retail sales (0.4%, 0.3%)

15-Aug 0830 Jul RS ex. motor vehicle (0.4%, 0.4%); ex. gas (0.7%, 0.4%)

15-Aug 0830 Q2 non-farm productivity (p) (3.4%, 1.4%)

15-Aug 0830 Q2 unit labor costs (p) (-1.6%, 1.9%)

15-Aug 0830 Aug Empire Manufacturing Index (4.3, 2.0)

15-Aug 0830 Aug Philadelphia Fed Mfg Index (21.8, 9.3)

15-Aug 0915 Jul industrial production (0.0%, 0.1%)

15-Aug 0915 Jul capacity utilization (77.9%, 77.8%)

15-Aug 1000 Jun business inventories (0.3%, 0.1%)

15-Aug 1000 Aug NAHB home builder index (65, 65)

15-Aug 1030 09-Aug natural gas stocks w/w

15-Aug 1600 Jun net TICS flows

15-Aug 1600 Jun long term TICS flows

15-Aug 1630 14-Aug Fed weekly securities holdings

PIPELINE: Credit Suisse to launch today

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

08/14 $1.75B Credit Suisse PerpNC7 6.375%

-

$9.425B priced Tuesday, $20.35B/wk

08/13 $7B *Exxon 7-part: $750M 3Y +30, $750M 3Y FRN L+33, $1B 5Y +45, 

----- $1B 7Y +65, $1.25B 10Y +75, $750M 20Y +85, $1.5B 30Y +95

08/13 $1.5B *UPS $400M $5Y +65, $400M 10Y +85, $700M 30Y +130

08/13 $500M *TD Ameritrade 10Y +108

08/13 $425M *Regency Centers LP 10Y +130

Eurodollar/Tsy options:

Eurodollar options, Pit/screen: Aug options expire Fri

* -12,000 short Dec 80/81/82 put trees, 0.0

* 10,000 Oct 87 calls, 1.75 vs. 98.195/0.08

Block, 1341:45ET, adds to over +15k in pit

* +20,000 Oct 87 calls, 1.75

* +20,000 Jun 95/98 call spds, 3.0-2.75, mostly 3.0

* +30,000 Oct 83 calls vs. -10,000 Dec 86/87 call strip, 10.5 net debit

* +30,000 Dec 78 puts, 3.75

* -110,000 Mar 86/90 call spds, 8.5

* +32,000 long Green Dec 95/97 1x2 call spds, 0.5

* Update -30,000 (-40k total) Mar 86/90 call spds, 8.5

* another -20,000 (-30k total) Mar 86/90 call spds, 8.5

* -5,000 Oct 76/78/80/81 put condors, 3.25

* -5,000 Red Mar 92/97 1x2 call spds, 7.0

* +5,000 short Sep 85 calls, 19.5

* -5,000 Mar 80/82 3x2 put spds, 11.0

* Update, over -40,000 Jun 92/93 call spds, 1.5 vs. 98.49/0.05%

Blocks,

* +10,000 Oct 78 puts, 1.75 at 1012ET, additional 5k bought in pit

* 10,000 Oct 80 puts, 4.5 at 0956:26

* 32,000 Jun 92/93 call spds, 1.5 vs. 98.49/0.05%

* 5,000 Red Sep20 86/90 call spds, 13.5

* 5,000 short Sep 91 calls, 1.0

Additional Blocks in lead-up to open

* +30,000 Dec 78 puts, 4.25 vs. 98.145/0.26% at 0734ET

* -5,000 Dec 82 calls, 11.5 vs. 98.145/0.40% at 0734ET

* -10,000 Dec 86 puts, 3.25 vs. 98.145/0.12% at 0734ET

* +10,000 Oct 80 puts, 5.5 vs. 98.145/0.32% at 0734ET

* another +5,000 Mar 81/82 put spds vs. Mar 91 calls at even 

Block, 0734:56ET,

* +10,000 Oct 80 puts, 5.5

Recap overnight blocks

* +30,000 Green Mar 76/77 put spds, 0.0 vs. 98.62/0.10% at 0427:08ET

* +5,000 Mar 81/82 put spds 1.5 over Mar 91 calls vs. 98.38/0.21% at 0527ET

Tsy options:

* +3,000 TYU 128.5/129 2x1 put spds, 1/64 vs. 130-11

Highlight screen trade coming into session

* over +28,000 TYV 131.5/132.5/133 call trees, even to 1/64

* 4,000 TYZ 134/136/138 call flys

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

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