US TSYS: STL FED BULLAR: RATE CUT "WARRANTED" SOON?

US TSY SUMMARY: Carry-over risk-off to start new week, rates trading firmer

after StL Fed Pres Bullard rate cut "may soon be warranted" comment. Equities

react -- knee jerk/algo-driven bid up to 2753.0, only to reverse just as quickly

to tap session lows (currently 2737.75, -14.75). Yld curves holding mostly

steeper, 3M10Y extends to new 12 year inverted lows. 

- Heavy volume (TYU>2.3M); 10Y yld -.0449 at 2.0797, Sep 2017 lows. FI implied

vols firmer/off highs; VIX gained rebounded, near top end of range late (+0.5 at

19.56 vs. 19.61H).

- Heavy risk-off/safe haven buying across curve, two-way flow into midday

included ongoing support in intermediates from real$ and bank portfolios, Block

sales TUU, EDH1. Heavy Option flow, Eurodollar screen trade >2.6M late session.

- On tap for Tuesday: Redbook retail sales; May ISM-NY current conditions; Apr

factory new orders.

- The 2-Yr yield is down 8.2bps at 1.8397%, 5-Yr is down 6.7bps at 1.8436%,

10-Yr is down 4.7bps at 2.0779%, and 30-Yr is down 2.5bps at 2.544%.

US TSY FUTURES CLOSE: Sharply higher, ongoing risk-off tone on heavy volume

(TYU>2.38M), session highs by the bell -- but shy of early London levels, curves

mostly steeper save 3M10Y that extended to new 12 year inverted lows. Update:

* 3M10Y  -4.314, -26.181 (L: -27.806 / H: -20.321)

* 2Y10Y  +4.092, 24.111 (L: 20.447 / H: 24.977)

* 2Y30Y  +6.71, 70.951 (L: 64.809 / H: 71.408)

* 5Y30Y  +4.987, 70.414 (L: 65.623 / H: 70.599)

Current futures levels:

* Sep 2-Yr futures up 7.125/32  at 107-17.875 (L: 107-10.5 / H: 107-18.25)

* Sep 5-Yr futures up 14.5/32  at 117-26.25 (L: 117-10.75 / H: 117-27)

* Sep 10-Yr futures up 19/32  at 127-11 (L: 126-23 / H: 127-12)

* Sep 30-Yr futures up 31/32  at 154-22 (L: 153-23 / H: 155-01)

* Sep Ultra futures up 1-10/32  at 177-03 (L: 175-31 / H: 177-28)

US EURODLR FUTURES CLOSE: Just off top end broad session range, lead quarterly

strong w/as much as 3 rate-cut chatter before year end gains momentum. Current

White pack (Jun 19-Mar 20):

* Jun 19 +0.030 at 97.560

* Sep 19 +0.140 at 97.890

* Dec 19 +0.160 at 98.065

* Mar 20 +0.150 at 98.265

* Red Pack (Jun 20-Mar 21) +0.120 to +0.130

* Green Pack (Jun 21-Mar 22) +0.105 to +0.120

* Blue Pack (Jun 22-Mar 23) +0.065 to +0.095

* Gold Pack (Sep 22-Jun 23) +0.035 to +0.060

US DOLLAR LIBOR: Latest settles resume 

* O/N +0.0062 at 2.3607% (-0.0020 last wk)

* 1 Month -0.0007 to 2.4298% (+0.0024 last wk)

* 3 Month -0.0240 to 2.4785% (-0.0224 last wk)

* 6 Month -0.0611 to 2.4555% (-0.0320 last wk)

* 1 Year -0.0969 at 2.4133% (-0.1088 last wk)

US SWAPS: Spds narrowed across the curve in second half fromearlier mixed levels

and steeper spd curve. Payer flys persist after two-way in 2s-10s earlier:

2s3s5s ongoing, 3s5s7s and 3s7s10s, 2s5s10s join the list, two-way in 2s and 5s

on net. Current spd levels:

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

Mon 1500    -0.56/5.00     -0.38/+0.00    -0.12/-4.25   -0.50/-27.81

1345        -0.56/5.00     -0.50/-0.12    -0.06/-4.19   -0.25/-27.56

1230        -0.31/5.25     +0.25/+0.62    +0.62/-3.50   +0.75/-26.56

1115        -0.44/5.12     +0.12/+0.50    +0.44/-3.69   +0.69/-26.62

9:00        -0.44/5.12     -0.06/+0.31    +0.31/-3.81   +0.38/-26.94

Mon Open    -0.62/4.94     -0.12/+0.25    +0.44/-3.69   +0.62/-26.69

Mon 7:45    -0.56/5.00     -0.38/+0.00    +0.19/-3.94   +0.44/-26.88

Fri 1500    +0.38/5.00     -0.06/+0.19    -0.56/-4.44   -1.00/-27.69

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

* Daily Effective Fed Funds Rate: 2.40%, volume: $65B

* Daily Overnight Bank Funding Rate: 2.38%, volume: $156B

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

* Secured Overnight Financing Rate (SOFR): 2.49%, $1.136T

* Broad General Collateral Rate (BGCR): 2.48%, $499B

* Tri-Party General Collateral Rate (TGCR): 2.48%, $449B

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

04-Jun Chi Fed conf: conducting/formulating/communicating mon-pol day one

04-Jun 0830 NY Fed Pres Williams, "Building Cultural Capital/Fncl Services Ind:

Emerging Practices, Risks and Opportunities", NY Fed

04-Jun 0855 01-Jun Redbook retail sales m/m

04-Jun 0945 May ISM-NY current conditions (77.3, --)

04-Jun 1000 Apr factory new orders (1.9%, -1.0%)

04-Jun 1000 Apr factory orders ex transport (0.7%, --)

PIPELINE: $15B estimated issuance for week

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

06/03 $750M Public Service Enterprise Group (PSEG) WNG 5Y +115a

06/03 $425M Dayton Power & Light WNG 30Y +155a

06/03 $Benchmark Home Depot 10Y +95a, 30Y +120a

06/03 $Benchmark Caisse de Depot et Placement du Quebec (CADEPO) 2Y +19a

Eurodollar/Tsy options:

Eurodollar options, Pit/screen:

Block, 1348:23, 140,000 option package

* -20,000 Sep 80/82/85 1x3x3 call flys, 5.0 vs. 98.03/0.10%

* 12,000 Sep 81/82 call spds, 2.0 vs. 97.845

* +19,000 Dec 80/83 1x2 call spds, 3.0

* -20,000 Dec 80/82 strangles, 21.0

* 45,000 short Jun 87 calls, cab/screen

* -10,000 Mar 80/83/87 call flys, 6.25/legs

* +10,000 Oct 76/78/80 call trees, 17.5/legs

Adding to large package from earlier:

* -41,000 short Dec 81/85/88 call flys, 6.0

* -20,000 short Dec 80/82/85/87 call condors

* -30,500 short Dec 87/90 call spds

* +61,500 Sep 81/82 call spds, 2.5

BLOCK, 1145:37ET,

* -15,000 Green Mar 82 straddles, 50.0

Block, 1026:30ET

* 10,000 Green Dec 82/85 call spds, 9.0 vs.

* 15,000 Green Dec 76 puts, 2.0 vs. 98.265

Large multi-leg package, ongoing/volume update:

* -9,000 short Dec 80/82/85/87 call condors, 7.5

* -18,000 81/85/88 call flys, 7.0-6.5

* -13,500 short Dec 87/90 call spds, 5.0 vs. 98.355

* +27,000 Sep 81/82 call spds, 1.5

* 42,000 Jun 80/82 call spds, 13.0

* 12,000 short Jun 80 puts, 1.0 vs, 97.27/0.10%

* 14,000 Jul 76 puts, 1.5 vs.

* 49,000 Jul 77 puts, 5.5 vs.

* 21,000 Sep 76 calls, 23.5 vs. 13,300 EDU 97.81

* Update, total +40,000 Sep 75 calls, 33.0 vs. 97.815/0.90%

* 10,000 Sep 73 puts, 0.5

* 5,000 Aug 76/77 2x1 put spds on screen

* 2,000 short Dec 80/82/85/87 call condors, 7.5

* 4,000 81/85/88 call flys, 7.0

* 3,000 short Dec 87/90 call spds, 5.0 vs. 98.355

* 6,000 Sep 81/82 call spds, 1.5

* -25,000 Jul 76 calls, 21.0 vs. 97.82/0.85%

* 10,000 Aug 76/77 2x1 put spds, 1.5

* 20,000 short Sep 77/80 put spds

* +20,000 short Jul 77/80/82 put flys

* +15,000 short Sep 77/80/82 put flys, 5.0

* -15,000 Mar 77/80 call spds, 16.0 vs. 98.205

BLOCK, 0715:13ET

* 10,000 Dec 83 calls, 9.0 vs. 98.00/0.25%

Overnight trade recap, heavy volume >900k:

* >+48,000 short Jul 81 puts, 4.5-5.0

* >+45,000 Sep 73/75/76 put flys, 2.25

* >20,000 Jun 76 calls

* >20,000 Sep 78/80 call spds

* +10,000 Blue Sep 90 calls, 1.0

Blocks:

* +25,000 Mar 80/85 1x2 call spds, 5.0 vs. 37,500 Mar 75 puts, 2.0 (0431:17ET)

* +20,000 Aug 76/78 1x2 call spds 1.25 over Aug 76 puts (0355:04ET)

* +5,000 Jul 77 calls, 15.0 (0328:33ET)

* +16,875 Jul 76/77/78 call trees 0.5 over Jul 76 puts (0317:14ET)

* +10,000 Dec 78/82 2x3 call spds 8.5 over 30,000 Dec 75 puts vs. 97.975

(0304:02ET)

* +20,000 Dec 78/80 call spds 3.5 over Dec 75 puts vs. 97.98/0.23% (0253:17ET)

TSY options, Pit/screen:

* 4,000 TYQ 125.5/129 strangles, 44/64

* 1,700 TYU 128 calls, 45/64 vs. 2,500 TYU 130 calls, 20/64

* 1,000 TYN 125/126/126.5 put flys, 1/64

* 1,200 TYN 127.5/128.5 call spds, 14/64

* +2,351 TYN 125.5 calls 1-32/64 vs. -5,758 TYQ 128 calls, 34/64

* 1,600 TYU 127 straddles, 2-16/64

* -1,000 TYN 126.75/127 strangles, 1-4/64

* +5,000 wk1 TY 126.25/126.75 call spds, 20/64 vs. 126-27.5 earlier

* 10,000 TYQ 123/124.5/126 put flys, 17/64 after the bell

* 14,600 TYN 125.75/126/126.5 put trees

Overnight trade highlights

* +7,000 TYN 124/126 2x1 put spds, 12- to 13/64

* +3,200 TYQ 123/124.5/126 put flys, 17/64

Blocks:

* 4,000 TYN 126.5/127.5 call spds, 30/64 (0521:00ET)

* 17,000 FVQ 116/116.5 put spds, 6/64 (0508:51ET)

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

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