US TSYS: RISK ON WARRANTED AHEAD THUS TRADE NEGOTIATIONS?

US TSY SUMMARY: Rates weaker all day, futures near second half lows by the bell

albeit on modest volumes, TYZ just over 1M. Post Sep FOMC minutes react: muted

with brief risk-on unwind before rates shifted lower again on back of stronger

equities.

- US/China trade headlines (soybean purchases, China open to partial trade deal

despite tech blacklist) spurred risk-on move coming into the session. Nascent

chatter over "partial" trade deal helped keep risk-on momentum rolling after

midday. Rates also partially pressured by corporate ($10.065B/day) and Tsy

supply related hedging.

- Right on the screws, latest US Tsy $24B 10Y note auction (912828YB0) awarded

1.590% rate (1.739% in September) vs. 1.590% WI; 2.43 bid/cover (2.46 previous).

- Not much of a lasting react to Sep FOMC minutes, economic outlook evolves

w/some Fed officials think expectations for cuts are overdone.

- The 2-Yr yield is up 4.6bps at 1.4657%, 5-Yr is up 4.9bps at 1.4004%, 10-Yr is

up 5.1bps at 1.5802%, and 30-Yr is up 5.1bps at 2.08%.

US TSY FUTURES CLOSE: Weaker all day, futures near second half lows by the bell.

Post Sep FOMC minutes react: muted with brief risk-on unwind before rates

shifted lower again on back of stronger equities. Yld curves mostly flatter,

update: 

* 3M10Y  +6.764, -10.344 (L: -19.5 / H: -9.404)

* 2Y10Y  +0.651, 11.195 (L: 9.995 / H: 13.912)

* 2Y30Y  +0.311, 60.895 (L: 59.725 / H: 64.765)

* 5Y30Y  -0.059, 67.534 (L: 66.896 / H: 70.217)

Current futures levels:

* Dec 2-Yr futures down 3.375/32 at 108-0 (L: 107-31.5 / H: 108-04)

* Dec 5-Yr futures down 8/32 at 119-25.5 (L: 119-25 / H: 120-03.75)

* Dec 10-Yr futures down 13/32 at 131-9.5 (L: 131-08.5 / H: 131-26)

* Dec 30-Yr futures down 29/32 at 163-21 (L: 163-14 / H: 164-24)

* Dec Ultra futures down 1-16/32 at 193-19 (L: 193-09 / H: 195-21)

US TSYS/10Y: Right on the screws, latest US Tsy $24B 10Y note auction

(912828YB0) awarded 1.590% rate (1.739% in September) vs. 1.590% WI; 2.43

bid/cover (2.46 previous). Indirects drew 58.53% vs. 62.61% prior, directs

12.79% vs. 12.72% (12.7% avg), and 28.68% for dealers vs. 24.67% prior (appr

26.0% avg).

US EURODLR FUTURES CLOSE: Weaker across the strip -- largely reversing Tuesday's

move, tail-end of Whites through Reds leading sell-off. Current White pack (Dec

19-Sep 20): 

* Dec 19 -0.010 at 98.165

* Mar 20 -0.045 at 98.455

* Jun 20 -0.060 at 98.570

* Sep 20 -0.070 at 98.650

* Red Pack (Dec 20-Sep 21) -0.07 to -0.06

* Green Pack (Dec 21-Sep 22) -0.055 to -0.045

* Blue Pack (Dec 22-Sep 23) -0.04 to -0.04

* Gold Pack (Dec 23-Sep 24) -0.035 to -0.035

US DOLLAR LIBOR: Latest settles

* O/N -0.0155 at 1.7900% (-0.0308/wk)

* 1 Month -0.0114 to 1.9274% (-0.0501/wk)

* 3 Month -0.0253 to 1.9843% (-0.0428/wk)

* 6 Month -0.0206 to 1.9428% (-0.0079/wk)

* 1 Year -0.0066 at 1.8819% (+0.0288/wk)

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

* Daily Effective Fed Funds Rate: 1.82%, volume: $69B

* Daily Overnight Bank Funding Rate: 1.80%, volume: $157B

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

* Secured Overnight Financing Rate (SOFR): 1.85%, $1.070T

* Broad General Collateral Rate (BGCR): 1.82%, $454B

* Tri-Party General Collateral Rate (TGCR): 1.82%, $431B

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

- 10-Oct 0830 05-Oct jobless claims (219k, 220k)

- 10-Oct 0830 Sep CPI (0.1%, 0.1%); Ex Food and Energy (0.3%, 0.2%)

- 10-Oct 1030 04-Oct natural gas stocks w/w

- 10-Oct 1100 Sep Kansas City Fed LMCI

- 10-Oct 1130 $50B US Tsy 4W (912796WD7), $40B 8W (912796WH8) bill auctions

- 10-Oct 1230 SF pres Daly, fireside chat, livestream

- 10-Oct 1300 $16B US Tsy 30Y Bond (912810SJ8) auction/Re-open

- 10-Oct 1400 Sep Treasury budget balance

- 10-Oct 1500 StL Fed Bullard mon-pol panel discussion

- 10-Oct 1530 SF pres Daly, business lunch, San Diego

- 10-Oct 1630 09-Oct Fed weekly securities holdings

- 10-Oct 1730 Clev Fed Mester, John Carroll University speaking event

- 10-Oct 1830 Atl Fed Bostic, Rainbow Push Coalition conf

PIPELINE: Italy 3-parter priced late; total $10.065B priced on day

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

10/09 $7B *Rep of Italy $2.5B 5Y +105, $2B 10Y +150, $2.5B 30Y +235

10/09 $1B *Bank of Nova Scotia +3Y +60

10/09 $1B *NIB (Nordic Investment Bank) 3Y +8

10/09 $565M *Thai Oil 30Y +145

10/09 $500M *Suntory Holdings Ltd 5Y +88

Later in week/month:

10/10 $350M EBRD (European Bank for Reconstruction & Development) 3Y SOFR+26

10/10 $Benchmark ADB (Asia Development Bank) 5Y +14

10/?? $Benchmark Industrial Bank of Korea

Eurodollar/Tsy options: 

Eurodollar Options (October options expire Friday)

* 10,000 Jan 86/88 call spds, 4.5

* +5,000 short Mar 91/95/97 call flys, 4.5

* +5,000 Mar 86/88 2x3 call spds, 5.5

* +5,000 Dec 78/80 put spds, 2.0

* +8,000 short Nov 87/88/91 put flys, 0.0 on screen

* +4,500 short Dec 81/83/85 put flys, 0.5

* +5,000 Blue Dec 85 puts, 6.5

* +28,000 Nov 88 calls on screen at cab

* +/-26,500 Oct 82 calls, 0.75 on screen a few minutes prior

* +5,000 Dec 86/87 call spds, 0.5

* +4,000 Mar 86/91 1x2 call spds, 6.25

* 4,500 Dec 80 put/87 call spd on 3x4 ratio, 6.0

* -15,000 Feb 83 puts, 10.0-11.0

spreading upside insurance from late '21 through '22

* +4,000 long Green (EDZ1, EDH2, EDM2, EDU2) 100 call strip, 28.0

* +4,000 Sep 87/91 2x3 call spds 1.5 over Sep 80 calls x3

* +4,000 Dec 88 calls, 0.75 on screen, Nov 88 calls trade cab small

* -1,500 Green Oct 87 straddles, 7.5

* -5,000 Dec 80/81/82 call flys, 2.0

* +2,500 Jun/Red Dec'20 90/93/97 call fly strips, 7.5

* 5,000 short Dec 82/85/86 put flys, 0.0

* over 12,000 Mar 78/80/81/82 put condors, 2.5 on screen

* over +17,900 Oct 82 calls, 0.75 last (Oct options expire Friday, see 0828ET

bullet for details)

--

Reminder, October Eurodollar options expire Friday tions expire Mon morning at

6:00 am ET while Red through Purple midcurves expire at 5:00 pm ET Fri). Final

OI coming into session according to CME Group Data below: 

-- Apr serial OI: 2,253,240 (1,272,454 calls, 980,786 puts);

-- Apr 1yr midcurve (Red) OI: 1,461,067 (626,697 calls, 834,370 puts);

-- Apr 2yr midcurve (Green) OI: 832,685 (354,738 calls, 477,947 puts);

-- Apr 3yr midcurve (Blue) OI: 377,421 (231,394 calls, 146,027 puts);

-- Apr 4yr midcurve (Gold) OI: 53,554 (29,399 calls, 24,155 puts);

That's a total of 4,977,967 options (2,724,727 of which are midcurves) coming

off the sheets.

Tsy options:

* 4,700 TYX 131/131.5 strangles on screen 54/64

* Update, some 45,000 TYX 135 calls between pit/screen, 1/64

* +3,000 TYZ 132/134 call spds, 31/64 over TYZ 128 puts vs. 131-23.5

Earlier screen and pit trade:

* +10,000 wk3 TY 130.5 puts, 6-7

* over +13,000 TYX 130 puts, 6/64

* 5,500 TYX 130.25 puts, 8-9

* over 2,000 FVX 120 straddles, 44.5

* -2,000 FVZ 120.5 calls, 24/64

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

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