US TSYS: TSYS REBOUND, SENSITIVE TO CHINA-TRADE HEADLINES

US TSY SUMMARY Tsys chopped higher/off highs by the bell. Rates recovered

slightly after Tue's sale, decent volume after midday (TYZ>1.17M), curves bull

flattening. Tsys inched higher after Aug final demand PPI -0.1% overall, first

decline since Feb'17. Late morning excitement on headlines US proposing new

round of trade talks w/China, fast risk-on react from algos on the headline,

buying equitys, selling Tsys. Risk-on unwind soon after, sources said on mkt

disappointment that Tsy Sec Mnuchin would be handling, NOT trade rep Lighthizer.

- US$ sold off, dollar index DXY -.448, 94.801 (94.753L/95.283H), $/Eur +0.0021

at 1.1627, $/Yen -.40 111.24; equities weaker (emini -2.0, 2887.75 vs.

2895.25H); Gold bounced (XAU +8.54, 1207.12); West Texas extended Tue's rally as

Hurricane Florence threatens Eastern seaboard (WTI +1.0, 70.25 vs. 71.26H). 

- Prop and fast$ buyers early, algo/program trading acct sellers late morning,

decent corp-supply hedging for third consecutive session, 2s10s fatteners. HEAVY

Eurodollar volume, heavy sales EDZ9, buyers EDZ8 and EDM9, heavy buying Jan19

FF. Tsy cash/ylds: 2Y 99-24.5 (2.744%), 5Y 99-15.5 (2.860%), 10Y 99-07.5

(2.963%), 30Y 97-28.5 (3.108%).

US TSY FUTURES CLOSE: Trading steady to slightly higher with the long end

outperforming the short end, volume (TYU 1.20M), Curves flatter; update:

* 2s10s -1.299, 21.456 (20.309L/22.985H);

* 2s30s -1.078, 35.983 (34.917L/37.554H);

* 5s30s -0.387, 24.589 (24.187L/25.693H);

Current futures levels:

* Dec Ultra bonds up 12/32 at 156-19 (156-10L/156-27H)

* Dec 30-yr Bond futures up 08/32 at 142-07 (142-01L/142-13H)

* Dec 10-yr futures up 03/32 at 119-13.5 (119-10.5L/119-16H)

* Dec 5-yr futures up 01/32 at 112-25.5 (112-24.5L/112-27.5H)

* Dec 2-yr futures EVEN 00/32 at 105-14.5 (105-14.25L/105-15.75H)

US EURODOLLAR FUTURES CLOSE: Trading steady to slightly higher in the middle of

a tight range, EDZ9 at even while rest of strip higher, large volume today.

Current White pack (Sep'18-Jun'19):

* Sep'18 +0.0075 at 97.6525

* Dec'18 +0.015 at 97.350

* Jun'19 +0.015 at 97.175

* Jun'19 +0.015 at 97.040

* Red pack (Sep'19-Jun'20) +0.010-EVEN

* Green pack (Sep'20-Jun'21) +0.020-0.010

* Blue pack (Sep'21-Jun'21) +0.020

* Gold pack (Sep'22-Jun'22) +0.020-0.010

US DOLLAR LIBOR: Latest settles,

* O/N +0.0039 at 1.9190% (+0.0003/wk)

* 1 Month -0.0135 to 2.1344% (+0.0034/wk)

* 3 Month -0.0027 to 2.3315% (+0.0003/wk) 

* 6 Month +0.0029 to 2.5606% (+0.0191/wk)

* 1 Year  -0.0040 to 2.8645% (+0.0190/wk)

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

* Secured Overnight Financing Rate (SOFR): 1.94% vs. 1.94% prior, $802B

* Broad General Collateral Rate (BGCR): 1.92% vs. 1.92% prior, $431B

* Tri-Party General Collateral Rate (TGCR): 1.92% vs. 1.92% prior, $416B

PIPELINE: Waiting for multiple issues to price

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

09/12 $2B #Saudi Arabia long 10Y Sukuk, +127

09/12 $1.2B #Bangkok Bank $600M each 5.5Y +122.5, 10Y +152.5

09/12 $500M #MUFJ Lease & Finance WNG 5Y +110

09/12 $500M #AIA Group 3Y FRN +52

09/12 $500M #Lazard Group 10Y +165

09/12 $300M #Reliance Standard Life Global 5Y

09/12 $Benchmark BNG Bank 5Y MS+13a

09/12 $Benchmark WEA Finance 10Y +130a, 30Y +165a

09/12 $Benchmark African Dev. Bank (AFDB) 5Y MS+7a

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

- Sep 13 08-Sep jobless claims (203k, 209k) 0830ET

- Sep 13 Aug CPI (0.2%, 0.3%) 0830ET

- Sep 13 Aug CPI Ex Food and Energy (0.2%, 0.2%) 0830ET

- Sep 13 09-Sep Bloomberg comfort index 0945ET

- Sep 13 Fed VC Randal Quarles testimony on "Implementation of Economic Growth

Regulatory Relief/Consumer Protec'n Act" Senate Baking Comm, 1000ET

- Sep 13 07-Sep natural gas stocks w/w 1030ET

- Sep 13 Atl Fed Pres Bostic, eco/mon-pol, Ms. Cncl Econ Educ'n, Q&A 1230ET

- Sep 13 US TSY $15B 30Y Note auction (912810SD1) 1300ET

- Sep 13 Aug Treasury budget balance (-$76.9b, -$183.0B) 1400ET

- Sep 13 12-Sep Fed weekly securities holdings 1630ET

Eurodollar/Treasury Option Summary

- Reminder, lead September Eurodollar futures and options expire Friday

(technically, futures and front Sep options expire Mon morning at 6:00 am ET

while Red through Purple midcurves expire at 5:00 pm ET Fri). Despite

significant position unwind effort to avoid pin risk last couple weeks, large

amount of open interest remains. Final OI coming into session according to CME

Group Data below:

-- Sep quarterly OI: 3,879,235 (1,543,760 calls, 2,335,475 puts);

-- Sep 1yr midcurve (Red) OI: 2,718,495 (1,353,455 calls, 1,365,040 puts);

-- Sep 2yr midcurve (Green) OI: 2,140,308 (908,108 calls, 1,232,200 puts);

-- Sep 3yr midcurve (Blue) OI: 707,568 (378,871 calls, 328,697 puts);

-- Sep 4yr midcurve (Gold) OI: 53,241 (37,555 calls, 15,686 puts);

That's a total of 9,498,847 options (3,879,235 in fronts, 5,619,612 total

midcurves) coming off the sheets.

Eurodollar options, Pit/Screen:Block, 13:51:36ET,

Late Block, MASSIVE ratio fly repeats earlier 

* 100,000 Short Mar 63/66/68 2x3x1 put fly (60k at 2.0, 40k at 1.5)

* 10,000 Blue Mar 67 puts over Blue Mar 71/72 call sprd for net 5.5 vs

9765.25/0.40%

* +20,000 short Sep 70 calls, 1.0

* 27,000 Dec 77 calls at CAB vs 9734/0.05%, note earlier 12.5k traded at CAB

covered 33/0.05%

* -7,000 Green Mar/Green Jun 66 put strip for net 17, covered 94.5/0.24% and

95.5/0.28%

Block, MASSIVE ratio fly at 10:44:59ET-10:48:59ET, 

* 100,000 Short Mar 63/66/68 2x3x1 put fly for net 2, 1.75 on splits

* 10,000 Green Sep 68/70 puts pver risk reversal at 0.5 vs 9692/0.40%

* 10,000 Short Dec 68 puts vs 9692/0.42% vs Green Dec 70 calls vs 9692.5/0.40%

for net 1

* 12,500 Dec 77 calls at CAB vs 9733/0.05%

* 5,000 Dec 72 Straddle at 14 vs 9737/0.10%

* Total 30,000 Mar 68/70/71 put fly at 3 vs 9716/0.08% all day

* 10,000 Mar 68/70/71 put fly at 3 vs 9716/0.08%, adds to 16k already today

* 4,000 Red Mar 58/61 5x2 put sprd for 0.5

* 6,000 Short Dec 63/65/67 put fly for net 3

* 3,250 Short Mar/Green Dec 70 1x2 Straddle Sprd for net 18, buying Green Dec

* 3,000 Green Dec 65 puts at 1.5 vs 9692/0.10%

* 4,000 Dec 71/72 put sprd at 1.5 vs 9733.5/0.10%

Tsy options, Pit/Screen:

* 5,000 Long Green Dec 55 puts at 3 vs 9689.5/0.10%

* >6,000 TYV 119.5 puts on screen recently, 17/64

* >6,000 TYZ 119.5 calls at 45/64

* -1,500 TYV 120/120.75/121 call trees, 3/64

* +3,000 TYX/TYZ 119 put calendar spds, 12/64, Dec over

* 1,000 TYZ 119.5 straddles, 1-29/64

* over 1,200 USZ 142 puts bought w/ USZ 142/144/147 1x3x2 call fly, 1-5/64

total/package

* 1,200 TYX 120.5/121/121.5 call trees, 0.0

* 1,100 TYZ 119 puts, 34/64 vs. 119-14

* +3,000 USZ 149 calls, 10/64

* +2,500 TYV 119.25 puts at 11/64 earlier

Block, 0749:14ET

* -10,000 FVZ 112-26, sell through 112-26.25 post time bid

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

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