US TSYS: Risk-On Dampened, Sanction Talk On China Over HK

US TSY SUMMARY: Generally quiet start to the post Memorial Day holiday week,

belying heavy volumes across the curve. Rate futures extended session lows as

equities climb higher (ESM0 +66.0) in early trade, Tsys holding to a narrow

channel for much of the session.

- Massive volumes a little deceiving, TYM >3.3M after the bell mostly due to

Jun/Sep roll ahead Fri's first notice. Otherwise, more normal volumes driven by

risk-on selling. Yld curves bear steepening, 2s/10s >51.0. 

- Swap spds running tighter across the curve, moderate unwind of last week's

expansion to session lows. Rate locks vs. incoming swappable supply helping keep

spds in range.

- Appears to be some risk-off (risk-on unwinds) after the bell on following

US/China headlines: "U.S. MULLS SANCTIONS ON CHINESE OFFICIALS, FIRMS OVER HONG

KONG" Bbg

- The 2-Yr yield is up 0.8bps at 0.1758%, 5-Yr is up 1.3bps at 0.3462%, 10-Yr is

up 3.3bps at 0.6916%, and 30-Yr is up 5.9bps at 1.4293%.

TECHNICALS:

US 10YR FUTURE TECHS: (M0) Still In A Range  

*RES 4: 141-26   0.764 projection of Feb 6 - Mar 9 rally from Mar 19 low

*RES 3: 140-24   High Mar 9 and key contract high

*RES 2: 140-00   Round number resistance

*RES 1: 139-21/22  High May 15 / High Apr 21 and key resistance  

*PRICE: 138-28 @ 16:00 BST, May 26

*SUP 1: 138-08+/06 Low May 06 / Low Apr 15

*SUP 2: 137-29+ 50-day EMA

*SUP 3: 137-16   Low Apr 7 and key near-term support

*SUP 4: 136-29+ Low Mar 24

10yr futures traded lower for much of the Tuesday session. Price continues to

trade within its current range with the key range parameters at 139-21/22 at the

top and 138-08+ at the base. The underlying theme remains bullish, however

futures still need to clear 139-22, Apr 21 high to end the consolation and

confirm a resumption of the uptrend that would target 140-00 and beyond. On the

downside, clearance of 138-08+, May 6 low would be bearish and expose 137-16.

AUSSIE 10-YR TECHS: (M0) Key Supports Remain Intact

*RES 3: 99.4850 - High Mar 10 and bull trigger

*RES 2: 99.3600 - High Apr 01 

*RES 1: 99.2250 - High Apr 17 

*PRICE: 99.1100 @ 16:08 BST, May 26

*SUP 1: 99.0200 - Low Apr 9

*SUP 2: 98.7800 - Low Mar 23 

*SUP 3: 98.5700 - Low Mar 20 

10yr futures recovered into the tail-end of last week but came well off the

highs into the close, doing little to reverse the outlook. Key support remains

at 99.0200, Apr 9 low where a break is still required to confirm a near-term

bearish outlook. The lower peaks since Apr 2 suggest futures are likely to break

the support eventually. This would open 98.7800 initially, Mar 23 low. On the

upside, key resistance is located at 99.2250, the Apr 17 high. Clearance of this

level would instead be bullish.

JGB TECHS: (M0): Still Holding Above Supports

*RES 3: 154.56 - High Mar 13 

*RES 2: 153.50 - High Mar 16

*RES 1: 153.06 - High Mar 31 and key resistance

*PRICE: 152.29 @ 16:12 BST, May 26

*SUP 1: 152.15 - Low May 12

*SUP 2: 151.86 - Low Apr 9

*SUP 3: 151.59 - Low Mar 26 

The (very) gradual recovery off the May 12 low stalled at Monday's high of

152.47. Price though remains above key support at 152.15, May 12 low. A break if

seen, would concern bulls and expose the 152.00 handle and support at 151.86,

Apr 9 low. An ability to hold above supports and more importantly a break of

153.06, Mar 31 high is required to confirm a bullish cycle and allow for a

recovery towards 153.30, Mar 16 high.

TSY FUTURES CLOSE: Weaker all day but off session lows after the bell on

following US/China headlines: "U.S. MULLS SANCTIONS ON CHINESE OFFICIALS, FIRMS

OVER HONG KONG" Bbg. Yld curves holding steeper. Update: 

* 3M10Y  +2.096, 55.798 (L: 52.289 / H: 57.919)

* 2Y10Y  +2.598, 51.337 (L: 48.252 / H: 52.561)

* 2Y30Y  +5.814, 125.696 (L: 119.42 / H: 126.62)

* 5Y30Y  +5.343, 108.73 (L: 102.713 / H: 109.484); Current futures levels:

* Jun 2-Yr futures down 0.375/32 at 110-8 (L: 110-07 / H: 110-08.625)

* Jun 5-Yr futures down 0.75/32 at 125-19.75 (L: 125-14.75 / H: 125-21.25)

* Jun 10-Yr futures down 3/32 at 139-2 (L: 138-25.5 / H: 139-08)

* Jun 30-Yr futures down 1-3/32 at 179-5 (L: 178-26 / H: 180-15)

* Jun Ultra futures down 2-14/32 at 219-3 (L: 218-15 / H: 222-03)

US TSYS/SUPPLY: US Tsy bill/note auctions scheduled for the week

DATE     TIME   AMOUNT   SECURITY    (CUSIP)/ANNC

-------------------------------------------------

27 May  1000ET   $40B   119D Bill     (9127962H1)

27 May  1000ET   $25B   273D Bill     (912796XE4)

27 May  1130ET   $20B 2Y Note R/O FRN (912828ZK9)

27 May  1300ET   $45B    5Y Note      (912828ZT0)

28 May  1130ET   TBA     4W Bill      (9127962X6)

28 May  1130ET   TBA     8W Bill      (9127963G2)

28 May  1300ET   $38B    7Y Note      (912828ZS2)

US TSY FUTURES: Late session roll update, pace accelerates ahead first notice

this Friday, May 29. Jun futures expire in mid-late June: 10s, 30s and Ultras on

6/19; 2s & 5s 6/30. Percentage completion:

* TUM/TUU appr 1,206,800 from -4.75 to -4.25, -4.62 last; appr 68% complete

* FVM/FVU appr 1,878,300 from 5.25 to 6.0, 5.5 last; appr 69% complete

* TYM/TYU appr 2,242,000 from 8.25 to 9.0, 8.5 last; appr 55% complete 

* UXYM/UXYU 312,600 from -9.5 to -6.75, -7.25 last; appr 47% complete

* USM/USU 433,000 from 1-17.75 to 1-18.5, 1-18 last; appr 53% complete

* WNM/WNU 313,700 from 1-17.25 to 1-18, 1-17.75 last; appr 53% complete

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

extension; forecast summary compared to the avg increase for prior year and the

same time in 2019. TIPS -0.01Y; Govt inflation-linked, -0.01.

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

*US Tsys.................0.14........0.08........0.11

*Agencies................0.03........0.11........0.01

*Credit..................0.14........0.08........0.08

*Govt/Credit.............0.14........0.08........0.10

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

*Aggregate...............0.12........0.08........0.09

*Long Govt/Credit........0.14........0.09........0.10

*Interm Credit...........0.12........0.07........0.08

*Interm Govt.............0.11........0.08........0.08

*Interm Govt/Cred........0.11........0.08........0.08

*High Yield..............0.09........0.06........0.04

US EURODLR FUTURES CLOSE: Mildly weaker to steady at points in Whites-Greens,

generally quiet return from extended holiday weekend. Current White pack levels:

* Jun 20 -0.005 at 99.678

* Sep 20 steady at 99.705

* Dec 20 -0.005 at 99.690

* Mar 21 -0.005 at 99.770

* Red Pack (Jun 21-Mar 22) -0.005 to steady

* Green Pack (Jun 22-Mar 23) -0.005 to steady

* Blue Pack (Jun 23-Mar 24) -0.005 to -0.005

* Gold Pack (Jun 24-Mar 25) -0.01 to -0.005

US DOLLAR LIBOR: Latest settles

* O/N -0.0005 at 0.0602% (+0.0009 last wk)

* 1 Month -0.0042 to 0.1695% (+0.0030 last wk)

* 3 Month +0.0020 to 0.3712% (-0.0074 last wk)

* 6 Month +0.0016 to 0.5716% (-0.0581 last wk)

* 1 Year -0.0020 to 0.6797% (-0.0365 last wk)

US SWAPS: Spds running tighter across the curve, moderate unwind of last week's

expansion to session lows. Rate locks vs. incoming swappable supply helping keep

spds in range. Current levels:

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

Tue 1500  -0.19/+9.06    -0.75/+3.25    -0.75/-0.75    -0.62/-45.38

1345      -0.06/+9.19    -0.75/+3.25    -0.75/-0.75    -0.62/-45.38

1130      +0.31/+9.56    -0.62/+3.38    -0.75/-0.75    -0.31/-45.06

0945      +0.06/+9.31    -0.75/+3.25    -0.69/-0.69    -0.56/-45.31

Tue Open  -0.12/+9.12    +0.00/+4.00    +0.25/+0.25    +0.75/-44.00

FED: NY Fed operational purchases for Tuesday

* Tsy 4.5Y-7Y, $3.000B accepted of $13.405B submitted

* TIPS 1Y-7.5Y, $1.000B accepted of $3.843B submitted

- 

NY Fed operational purchases schedule for Wednesday ($4.5B)

* 1010-1030ET: Tsy 20Y-30Y, appr $2.5B

* 1100-1120ET: Tsy 7Y-20Y, appr $2.0B

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

27-May 0700 22-May MBA Mortgage Applications (-2.6%, --)

27-May 0855 23-May Redbook retail sales m/m

27-May 0930 NY Fed Pres Williams Bbg interview

27-May 1000 May Richmond Fed Mfg Index (-53, -40)

27 May 1000 US Tsy $40B 119D Bill auction (9127962H1)

27 May 1000 US Tsy $25B 273D Bill auction (912796XE4)

27-May 1030 May Dallas Fed services index

27 May 1130 US Tsy $20B 2Y Note R/O FRN (912828ZK9)

27-May 1230 St. Louis Fed President James Bullard

27 May 1300 US Tsy $45B 5Y Note auction (912828ZT0)

27-May 1400 Federal Reserve Beige Book

27-May 1500 Atl Fed Pres Bostic virtual panel on economy

PIPELINE: Waiting for Wells Fargo to launch

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

05/26 $3.5B #Citigroup 11NC10 +188

05/26 $2.5B #Total Capital Int 30Y +170

05/26 $2.3B #Stryker $650M 5Y +85, $1B 10Y +130, $650M 30Y +150

05/26 $1.5B *Applied Materials $750M each 10Y +110, 30Y +135

05/26 $1B #Swedbank 3Y +112.5

05/26 $1B #Microchip 3Y +245

05/26 $500M *Kellogg WNG 10Y +143

05/26 $400M *Interstate Power & Light WNG 10Y +165

05/26 $Benchmark Wells Fargo 4NC3, 8NC7

05/?? $Benchmark BNG 10Y +43a

Eurodollar/Tsy options

Eurodollar options

* 10,000 Mar 90/92 3x2 put spds

* +1,000 Sep 97/98/100 call flys earlier, 2.0

* +4,000 Jun 97 calls, 0.5

Block, 0616:40ET 6,500 Sep 100.12 calls, 0.5, still offered

Tsy options:

* +5,000 TYN 140 calls, 11/64

* +50,000 FVN 113 puts, .5/64

* -5,000 TUN 110.25/110.37 put spds, 2.5/64 earlier

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

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