US TSYS STABILIZE LOWER AFTER GOOD 5Y AUCTN; AWAIT TRUMP/TAXES

     US TSYS SUMMARY: Treasuries declined Wed amid overnight selloff on tax

reform/hawkish Fed Chr Yellen/corporate rate lock hedges, and continued weaker

in NY hours but stabilized. Tsys digested mixed $13B 2Y FRN reopening and a

strong $34B 5Y auction but some said markets saw some precautionary sales or

real money sales into quarter-end, Fri. 

- US Pres. Trump at about 3:15pm ET was to speak on corporate taxes. 

- Tsys saw overnight bear steepening, US$ gains, weak Bunds, and then sell-stops

hit too. Tsys then dipped on 1.75% Aug durable goods, and CTA stops hit in 2Y,

5Y, 10Ys; corp and Tsy supply hedges; bk and insurer sales in 10Y, 30Y. Fast$,

prop buying on dips, insurer sales in 10Ys. 

- Huge block post snuck into the lineup by CME: a 10Y/Ultra Tsy futures

steepener blocked at 9:25:04am ET: buy of 52K TYZ at 125-16.5 vs. sale of 14K

WNZ Ultra Bonds at 165-11, about $4.0M DVO1. Steepener helped turn mkt around.

Buys off low as Yen regained some ground vs. US$. 

- Strong $34B 5Y; 1.911% rate, strong 69.6% indirects, 0K 7.1% directs, left

only small 23.3% for dealers. 

- Mixed/soft $13B 2Y FRN reopening: 5.5 bps discount margin, weak 47.1%

indirects, no directs, 52.9% left over for dealers. 

- TSYS 3PM ET: 2Y 1.482%, 3Y 1.605%, 5Y 1.909%, 7Y 2.138%, 10Y 2.309%, 30Y

2.862%.

US TSY FUTURES CLOSE: Sharply lower/off lows after extending range in second

half, volume tapering off after heavy first half trade. Total TYZ VWAP 125-16,

volume on day 1.82M, 125-16 leads w/332k. Massive Block post snuck into line up

by CME, 10s/Ultra steepener Block at 0925:04ET: +52k TYZ 125-16.5 vs. -14 WNZ,

165-11, appr $4M DV01. VWAP on session 125-17, high volume price of 125-17

w/310k. TYZ/WNZ steepener helped turn mkt. Buying off lows as Yen regained some

ground vs. US$. Current futures levels: 

* Dec Ultra bonds down 2-23/32 at 164-31 (164-23L/167-20H) 

* Dec 30-yr Bond futures down 1-25/32 at 153-00 (152-24L/154-25H) 

* Dec 10-yr futures down 16/32 at 125-16 (125-10L/125-30.5H) 

* Dec 5-yr futures down 7.5/32 at 117-18.75 (117-15L/117-25.5H) 

* Dec 2-yr futures down 1.25/32 at 107-27.75 (107-26.5L/107-28.75H)

US EURODLR FUTURES CLOSE: Lower by the bell, off session lows on decent volume

(Red Dec'18 leads w/500k). Rate hike probability for Dec climbs to 71.3% vs.

64.1% late Tue. Current White pack (Dec'17-Sep'18): 

* Dec'17 -0.010 at 98.500 

* Mar'18 -0.020 at 98.390 

* Jun'18 -0.030 at 98.290 

* Sep'18 -0.035 at 98.220 

* Red pack (Dec'18-Sep'19) -0040-0.050 

* Green pack (Dec'19-Sep'20) -0.055-0.065 

* Blue pack (Dec'20-Sep'21) -0.070-0.080 

* Gold pack (Dec'21-Sep'22) -0.085-0.090

US SWAPS: Spds running tighter across the curve by the bell, intermediates

lagging the wings. Largely driven by incoming swappable supply, payer unwinds by

fast$ as rates head south. FX-tied rate receiving earlier as Yen weakened vs.

US$. OTC vol higher across the surface, receivers gaining traction in short end.

Latest spread levels: 

* 2Y -0.62/25.12 

* 5Y -0.25/8.00 

* 10Y -0.38/-4.25 

* 30Y -0.88/-33.38

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

- Sep 28 23-Sep Initial weekly jobless claims (282K, 265K) 0830ET

- Sep 28 Q2 GDP (3rd) (3.0%, 3.0%) 0830ET

- Sep 28 Q2 GDP Price Index (1.0%, 1.0%) 0830ET

- Sep 28 Aug advance goods trade gap (-$65.1B, --) 0830ET

- Sep 28 Aug advance wholesale inventories (+0.6%, --) 0830ET

- Sep 28 Aug advance retail inventories (-0.2%, --) 0830ET

- Sep 28 KC Fed George: Bkg & Econ/Minority Bkrs Forum KC Mo Q/A 0945ET

- Sep 28 24-Sep Bloomberg comfort index 0945ET

- Sep 28 Fed VC Fischer on BOE Independence/Conf in Ldn UK Q/A 1000ET

- Sep 28 22-Sep natural gas stocks w/w 1030ET

- Sep 28 Sep Kansas City Fed Mfg Index (16, --) 1100ET

- Sep 28 US Tsy $28.0B 7-Year Note auction 1300ET

- Sep 28 Aug farm prices (-2.9%, --) 1500ET

- Sep 28 27-Sep Fed weekly securities holdings 1630ET

Eurodollar/Treasury option summary

Eurodollar options,

Blocks:

0406ET

+5k EOX 78/80p strip, 2.0 vs. 98.16/0.22%

0608ET

-5k E2Z 78/81p spds, 13.5 vs. 97.975/0.40%

0756ET more on screen, 42k total

+15k EOZ 80p, 3.0

0928-0929ET

-23.9k EDF 82p vs. +EDH 81/82 2x1p spds, .25 net

1235ET

+10k EOV 82/83c spds, 1.0 vs. 98.16/0.10

Pit/screen:

+15k EDM 80/81p spds, 2.5

15k EDM 78/80p spds, 1.5 vs. 98.265

-10k EDZ 83/85/87 iron flys, 8.5 vs. 98.52/0.10%

-5k EDX/EDZ 2x1c spds, 0.5

4k EDM 80/81p spds

1k EDF/EDG 81/82/83 2x3x1p fly strip, 4.0

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

+10k EOZ 78/81/82p flys, 1.0

5k EOX 80/81 3x2p spds vs.

10k EOX 82c, 1.5 net

-5k EOV 81/82p spds, 8.5

-5k EOV 80/81/82p trees, 6.0

-5k EOZ 78/80p spds vs.

+E3Z 73/76p spds, 1.5db/steepener

+5k EOZ 80p, 3.5

-5k EOZ 82p, 15.0

3k EOZ 81/82/83p trees, 2.0

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

+50k E2Z 76/77/78/80p condors, 4.0

-30k E2Z 82/83c spds, 1.5 vs.

+E2Z 76/77p spds, 2.5 vs. 97.95/0.20%

15k E2Z 75/77p spds, 1.5

10k E2Z 76/78p spds

-5k E2M 75/78 3x2p spds, 17.0

-5k E2H 77/80p spds, 11.0

-5k E2Z 77/80 2x1p spds, 5.5 vs. 97.99/0.10%

-5k E2Z 80p, 8.0

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

18.7k E3V 76/77 2x1p spds, 1.5

+6k E3Z 76p, 5.5 vs. 97.825/0.30%

5l E3V 77p, 1.75

5k E3Z 75/76/77p trees, 1.0

4.25k E3Z 76p, 5.5 vs. 97.825

Tsy options

Block:

0859ET

-40k TYX 123+p, 5

Pit/screen:

-10k TYX 123.2p, 4

-5k TYZ 124+p, 24

2k TYZ 125+/126+p spds, 40

1k TYX 123+/124+/125+p trees, 20

1k wk2 TY 154/155+c spds, 10

1.25k USZ 151p, 55

1.2k USX 151/153/154p trees, 2

1.5k FVX 116.7/117/117+p tres, 7.5 vs.

FVX 118/118+c spds, 6

--MNI New York Bureau; tel: +1 212-669-6432; email: sheila.mullan@marketnews.com

[TOPICS: MTABLE,MNUEQ$,M$U$$$,MR$$$$,M$$FI$,MN$FI$]