US TSYS: TSY YIELDS BACK TO EARLY SEPTEMBER LOWS

US TSY SUMMARY: Rates bid but off midday highs, Tsy futures marched marched past

Tue's post-ISM highs to levels not seen since Sep 10, 10YY slipped to session

low of 1.5786, 30YY 2.0649%. Risk-off tone underscored by weak global equities,

S&Ps -63.0 early in second half, Gold climbs back over 1500.0 (+23.0), modest

unwinds in late trade. Little market react from Fed speakers Barkin, Harker and

Williams. WTO annc US can impose $7.5B tariffs re: Airbus dispute.

- Flow included swap-tied selling short end, prop and fast$ selling

intermediates,light prop and real$ sales long end last half hour as Tsys paring

first half gains some deal-tied selling in the mix. 

- Short end grinds higher -- session highs as chances of two more rate cuts by

year end come back in focus: Oct 30 chances have see sawed around mid 90% to

100% for weeks, while chances for Dec cut back around 45%. Options trade has not

really woken up to take advantage of lead up/or current levels, many plying

sidelines ahead Fri's NFP.

- The 2-Yr yield is down 6.6bps at 1.48%, 5-Yr is down 6bps at 1.43%, 10-Yr is

down 4bps at 1.5957%, and 30-Yr is down 0.7bps at 2.0856%.

US TSY FUTURES CLOSE: Bid, but off midday session highs, futures marched Tue's

post-ISM highs to levels not seen since September 10, 10YY slipped to session

low of 1.5786, 30YY 2.0649%; yld curves bull steepening, update: 

* 3M10Y  +0.404, -15.833 (L: -18.288 / H: -13.248)

* 2Y10Y  +2.437, 11.173 (L: 9.13 / H: 11.629)

* 2Y30Y  +5.767, 60.225 (L: 55.126 / H: 60.748)

* 5Y30Y  +5.466, 65.46 (L: 60.177 / H: 65.858)

Current futures levels:

* Dec 2-Yr futures up 3.75/32 at 107-31.75 (L: 107-27.25 / H: 108-01)

* Dec 5-Yr futures up 10.5/32 at 119-23.75 (L: 119-10.25 / H: 119-26.5)

* Dec 10-Yr futures up 15/32 at 131-4 (L: 130-14 / H: 131-08)

* Dec 30-Yr futures up 18/32 at 163-8 (L: 162-04 / H: 163-20)

* Dec Ultra futures up 20/32 at 193-8 (L: 191-19 / H: 194-02)

US EURODLR FUTURES CLOSE: Well bid across the strip, off midday highs by the

bell, short end outperforming as chances of two more rate cuts by year end creep

higher. Current White pack (Dec 19-Sep 20): 

* Dec 19 +0.050 at 98.130 (99.145 high -- Sep 15 level)

* Mar 20 +0.060 at 98.450

* Jun 20 +0.065 at 98.575

* Sep 20 +0.070 at 98.660

* Red Pack (Dec 20-Sep 21) +0.060 to +0.070

* Green Pack (Dec 21-Sep 22) +0.060 to +0.065

* Blue Pack (Dec 22-Sep 23) +0.060 to +0.065

* Gold Pack (Dec 23-Sep 24) +0.045 to +0.055

US DOLLAR LIBOR: Latest settles

* O/N +0.0251 at 1.8512% (+0.0241/wk)

* 1 Month -0.0136 to 2.9973% (-0.0342/wk)

* 3 Month -0.0323 to 2.0564% (-0.0423/wk)

* 6 Month -0.0395 to 2.0170% (-0.0460/wk)

* 1 Year -0.0772 at 1.9582% (-0.0849/wk)

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

* Daily Effective Fed Funds Rate: 1.88% vs. 1.90% prior, volume: $75B

* Daily Overnight Bank Funding Rate: 1.85% vs. 1.90% prior, volume: $160B

US TSYS: REPO REFERENCE RATES: (rate, volume), Climb higher again 

* Secured Overnight Financing Rate (SOFR): 1.88% (2.35% prior), $1.183T

* Broad General Collateral Rate (BGCR): 1.84% (2.35% prior), $457B

* Tri-Party General Collateral Rate (TGCR): 1.84% (2.35% prior), $430B

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

03-Oct 0245 Chi Fed Evans, mon pol event Madris, Spain, Q&A

03-Oct 0730 Sep challenger layoff plans (39.0%, --)

03-Oct 0830 28-Sep jobless claims (213k, 215k) 

03-Oct 0830 Fed VC Quarles, Bank conf, Brussels

03-Oct 0945 Sep Markit Services Index (final) (50.9, 50.9)

03-Oct 1000 Aug factory new orders (1.4%, -0.2%)

03-Oct 1000 Aug factory orders ex transport (0.3%, --)

03-Oct 1000 Sep ISM Non-manufacturing Index (56.4, 55.1)

03-Oct 1030 27-Sep natural gas stocks w/w

03-Oct 1130 4W Note auction, TBA 01 Oct Annc

03-Oct 1130 8W Note auction, TBA 01 Oct Annc

03-Oct 1210 Clev Fed Mester, panel discussion Brookings Inst 

03-Oct 1300 Dallas Fed Kaplan, community forum, Houston Q&A

03-Oct 1630 02-Oct Fed weekly securities holdings

03-Oct 1835 Fed VC Clarida, economy/mon-pol, NY, Q&A

PIPELINE: Toyota Motor Credit priced

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

10/02 $1.75B *Toyota Motor Credit $40M 2Y +33, $850M 2Y FRN +29, $500M 5Y +60

10/02 $400M UDR 2030 Tap +125a, 15Y +160a

10/02 $Benchmark National Bank of Canada 3Y +75a

10/?? $Benchmark BNG Bank 5Y

10/02 $1B *EIB (European Investment Bank) 10Y +19

Canadian issuance:

10/02 C$300M Allied Properties 7.5Y +180a

Eurodollar/Tsy options: 

Eurodollar Options:

* +20,000 Dec 77/80/81 broken put flys, 1.25

* +10,000 Mar 88/91/93 call flys, 2.5 (adds to +25k Block) in addition to

* +10,000 short Jun 90/93 1x2 call spds, 2.5, 5.0 total package

Block, 1154:30-:56ET

* total 25,000 Mar 88/91/93 call flys, 3.0

* +20,000 Oct 83 calls, 0.75 on screen

* +20,000 Dec 83/86 1x2 call spds, 0.5

* 7,500 Jun 87/92 call spds, 11.0 vs. 98.56/0.25%

* +18,000 Dec 83/85/87 broken call trees, 0.0

* 4,000 Oct 81 puts, 4.75 vs. 98.125

* 3,000 short Nov 87/88 call spds, 3.5 vs. 98.655/0.10

* Update, >+100,000 (pit/screen/block) Dec 77 puts, 1.0/short cover

Block, 1045:32ET

* 10,000 Dec 77 puts, 1.0 -- adds to +30k Blocked earlier while screen volume

climbs over 69k (possible unwind, OI 335k coming into session)

* -30,000 Dec 80/81 put spds, 6.0 vs. 98.125/0.18%

* 25,000 Green Nov 82 puts, 1.0 vs. 10,000 Green Dec 87/92 call spds, 9.5, 14.0

net/package

* +10,000 short Nov 86/87 call spds vs. Green Nov 87/88 call spds, 1.0 net debit

bull curve steepener

* +10,000 Nov 88 calls on screen, 0.5

* -10,000 Dec 81 calls, 9.5 on screen earlier

* +4,000 Mar 90/95 call spds, 4.0 vs. 98.425/0.14%

* total +35,000 (20k blocked Nov 85 calls 1.75 vs. 98.11/0.11%

* 6,000 Mar 87/90/92 call trees, 0.5

* 10,000 Nov 85 calls Blocked, 1.75 vs. 98.11/0.11%

* 4,000 Oct 81 puts, 6.0

On screen just ahead ADP release

* 20,000 Nov/Dec 80 straddle spds, 4.5

* just over 38,000 Oct 82 calls, 1.5 last

Block, 0818:32ET, adds to earlier 15k block and >30k screen trade

* another 15,000 Dec 77 puts, 1.0

Block, 0656-0658ET, adds to screen trade, total volume >31,000

* total 15,000 Dec 77 puts, 1.0

Tsy options

* -3,500 wk1 FV 119.75 straddles, 28.5/64

* -3,000 TYX 130/131.5 1x2 call spds, 19/64

* Update, over -8,000 TYX 132 calls 25- to 24/64 as support in underlying wanes

in second half trade, total volume in the calls just over 66k on day

* -10,000 TYX 131/132/133 call flys, 12/64 (unwind after paper +20k flys at 6/64

back on Sep 12)

* 2,000 TYX 130.25 puts, 30/64 vs. 130-25.5

* 1,700 TYX 130/132 call sprds, 58/64

* 1,000 USX 158/160 put spds, 22/64 vs. 162-30/0.12%

* scale seller over -6,000 TYZ 127.5.134 strangles, 21- to 20/64

On screen coming into the session

* 2,400 TYX 130/131.5 strangles, 52/64

* +5,000 TUZ 108.25/108.75 call spds, 6.5/64

Early overnight Block

* 20,000 FVZ 120/120.75/121.25 call trees, 4.5/64

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

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