US TSYS: TRADE TALKS CONSTRUCTIVE DESPITE TARIFF INCREASE

     MNI US Closing FI Analysis: Trade Talks Constructive Despite Tariff

Increase

US TSY SUMMARY: Anti-climatic end to the US/China trade headline driven week.

Well off late morning highs -- Tsy futures lower after the bell as Pres Trump

picks up tweeting about how constructive trade negotiations were. Trade dropped

off significantly after London close. Yld curves going out mildly steeper. 

- Neither equities OR Tsys liked Fed Bostic's policy prediction comment (1 hike

by yr end). Aside from the Tsy dip post Block sales, rates were back to risk-off

bid. Eminis, however, took out Thu's lows triggering some stops along the way.

Sources reported program CTA accounts triggered on VIX posting gains (marginal,

well off midwk/4 mnth highs), decent Chicago based cta account selling equities.

- General quiet after London went home: Vol getting hit (VIX -3.5) as Tsys pared

gains and equities paring losses (ESM9 +20.0 late) amid position squaring into

weekend. Sources note Global Times chief editor Hu Xijin (GT been in limelight a

lot this week) intimates that negotiations didn't break down, were constructive

on both sides and may continue in Beijing.

- The 2-Yr yield is up 0.4bps at 2.262%, 5-Yr is up 1.7bps at 2.2616%, 10-Yr is

up 2.3bps at 2.4654%, and 30-Yr is up 2.3bps at 2.8844%.

US TSY FUTURES CLOSE: Trading lower as Pres Trump picks up tweeting about how

constructive trade negotiations were. Update: 

* 3M10Y  +2.617, 4.352 (L: 0.255 / H: 4.708)

* 2Y10Y  +1.903, 19.927 (L: 17.768 / H: 20.725)

* 2Y30Y  +1.672, 61.59 (L: 59.522 / H: 62.93)

* 5Y30Y  +0.244, 61.707 (L: 60.679 / H: 64.402)

Current futures levels:

* Jun 2-Yr futures (TU) steady at at 106-15.75 (L: 106-14.625/H: 106-18)

* Jun 5-Yr futures (FV) down 2/32 at 115-21.25 (L: 115-20/H: 115-28.25)

* Jun 10-Yr futures (TY) down 3.5/32 at 123-28 (L: 123-27/H: 124-07)

* Jun 30-Yr futures (US) down 6/32 at 148-16 (L: 148-14/H: 149-05)

* Jun Ultra futures (WN) down 4/32 at 166-5 (L: 166-02/H: 167-05)

US TSY FUTURES: *** Late session roll update, but starting to see some calendar

spds trading w/ September taking lead from June at end of this month (first

notice May 31). June future's staggered expiration on June 19 for 10s, 30s and

Ultras, and June 28 for 2s and 5s. Latest volume:

* TUM/TUU appr 28,100 from -6.5 to -5.88, -6.25 last;

* FVM/FVU appr 26,800 from -4.0 to -3.25, -3.75 last;

* TYM/TYU appr 12,700 from -8.5 to -7.5, -8.0 last;

* USM/USU appr 2,100 from 20.5-20.75, 20.5 last;

* WNM/WNU appr 3,800 from -20.75 to -20.0, -20.25 last;

US EURODLR FUTURES CLOSE: Steady to mixed across the strip -- well off

first-half highs w/ rates paring gains on unfounded chatter (via Twitter) that

US/China trade negotiations were constructive, even after US slapped on another

15% tariff to 25% on $200B China goods. Current White pack (Jun 19-Mar 20):

* Jun 19 +0.005 at 97.480

* Sep 19 +0.015 at 97.555

* Dec 19 +0.015 at 97.580

* Mar 20 +0.015 at 97.695

* Red Pack (Jun 20-Mar 21) steady to +0.010

* Green Pack (Jun 21-Mar 22) -0.01 to -0.005

* Blue Pack (Jun 22-Mar 23) -0.01 to -0.005

* Gold Pack (Sep 22-Jun 23) -0.005 to -0.010

US DOLLAR LIBOR: Latest settles resume 

* O/N -0.0025 at 2.3563% (-0.0215/wk)

* 1 Month -0.0043 to 2.4490% (-0.0176/wk)

* 3 Month -0.0074 to 2.5278% (-0.0320/wk)

* 6 Month +0.0054 to 2.5870% (-0.0303/wk)

* 1 Year -0.0088 at 2.6933% (-0.0522/wk)

STIR: Federal Reserve Bank of New York posts yesterday's EFFR:

* Daily Effective Fed Funds Rate: 2.38%, volume: $73B

* Daily Overnight Bank Funding Rate: 2.37%, volume: $154B

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

* Secured Overnight Financing Rate (SOFR): 2.41%, $1.011T

* Broad General Collateral Rate (BGCR): 2.38%, $477B

* Tri-Party General Collateral Rate (TGCR): 2.38%, $454B

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

13-May 0905 Boston Fed Pres Eric Rosengren, Fed Policymaking conf

13-May 0910 Fed Brd VC Richard Clarida, Fed Policymaking conf

13-May 1100 May NY Fed expectations survey

13-May 1130 US TSY $39B 13W bill auction (912796QV4)

13-May 1130 US TSY $36B 26W bill auction (912796SS9)

US SWAPS: 

PIPELINE: Quiet end after $51.6B priced on week

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

No new issuance Friday

-

$3B Priced Thursday

05/09 $500M *O'Reilly Automotive WNG 10Y +145

05/09 $2.5B *Asia Infrastructure Inv Bank (AIIB) 5Y +6

Eurodollar/Tsy options:

Eurodollar options, Pit/screen: 

* +2,500 Dec 72/73/75 2x4x1 put flys, 5.0

* -6,000 Dec 76 straddles, 27.0

* +5,000 Sep 73 puts 0.75

* +10,000 short Oct 75/76/77 put trees, 1.5

* +4,500 Dec 72/73 put spds, 2.0 vs. 97.62

* +6,500 Mar/Green Mar 73/76 put spd spd, 2.25-2.5/EDH over

BLOCK, 1231:26ET, 5x4 put spd 7.0 net

* +19,840 Green Dec 73 puts 3.0 vs.

* -15,872 Green Dec 75 puts 5.5

BLOCKs, 1034-1035ET, 6.5 net on 3x2

* total 37,500 short Jul 77 puts, 6.5

* total 25,000 short Jul 78 puts, 13.0

* -12,000 short May 77 puts, cab

* 6,000 Red Jun 73/82 strangles, 16.0 vs.

* 4,000 Red Jun 77 straddles, 45.5

* 6,000 Mar 73/81 strangles, 12.0 vs.

* 4,000 Mar 76 straddles, 36.5

* Update, total +12,500 Mar/Green Mar 73 put spds, 1.5

* +10,000 Jul 75/76 1x2 call spds1.75

* +5,000 short Jun 73/76 2x1 put spds, 1.5

* +20,000 Mar 80/83 call spds vs. Dec 78 calls, 0.0 vs.

* -20,000 Mar 73 puts at 4.0, 4.0 net package

* +11,000 Dec 72/73 call spds, 2.5 vs. 97.565

* 2,500 Blue Jun 76/77/78 call trees, 3.0

* Update, +10,500 short Jun 77/78/81 broken call flys, 0.5

* 2,500 Blue Jun 76/77/78 call trees, 3.0

* Update, +10,500 short Jun 77/78/81 broken call flys, 0.5

Quiet trade volume so far (screen<70k)

* +5,000 short Jun 77/78/81 broken call flys, 0.5

* paper sizing the Oct 80/82/85 and 80/82/83 call flys

Tsy options, Pit/screen:

* -2,700 FVN 115.5/116.25 strangles, 30/64

* -10,000 TYN 123.5/125 call over risk reversals, 8/64 vs. 124-12 earlier

* 2,000 wk3 TY 124.2/124.7 1x2 call spds, 2/64

BLOCK, 0819:30ET

* 8,750 wk3 TY 123.75 puts, 13/64 vs. 124-02/0.34%

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

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