US TSYS: US/MEXICO TARIFF THREAT SPURS HEAVY RISK-OFF RALLY

US TSY SUMMARY: Sharp risk-off move Friday, kicked off late Thursday on US Pres

Trump threatened Mexico with massive tariff increase. Heavy volume, Sep takes

lead quarterly (TYU>2.99M). 10Y yld -.0818 at 2.1315, Sep 2017 lows. FI implied

vols surged to new highs; VIX gained but pared/held range (+1.41 at 18.71 vs.

19.72H).

- Heavy risk-off/safe haven buying across curve, month end flow w/lrge late

sales. Jun19 Eurodollar futures gap bid to 97.55F early in second half, rate cut

crowd gathers momentum (Barclays call for 3 rate cuts by yr end/starting in fall

-- aggressive call!). Potential air pocket as traders pointed out just over 22k

EDM9 traded at 97.527 but some 17k traded from 97.53-97.55. Lead quarterly came

under heavy selling soon after (EDM9 +4.75 at 97.532C). 

- Aside from mentioning negative aspect of increased Mexico tariffs on US

economy, Fed Kashkari also touched upon curve..."might be signaling Fed is

slightly restrictive".

- The 2-Yr yield is down 13.9bps at 1.9221%, 5-Yr is down 10.6bps at 1.9143%,

10-Yr is down 8.4bps at 2.1298%, and 30-Yr is down 7bps at 2.57%.

US TSY FUTURES CLOSE: US TSY FUTURES: Running a late update, extending to new

session highs with equities sinking lower. Update:

* 3M10Y  -6.087, -21.867 (L: -22.526 / H: -16.665)

* 1Y10Y  -0.264, -8.685 (L: -14.132 / H: -6.019)

* 2Y10Y  +5.581, 20.62 (L: 14.914 / H: 20.993)

* 2Y30Y  +7.204, 64.914 (L: 58.771 / H: 64.97)

* 5Y30Y  +3.647, 65.499 (L: 62.351 / H: 65.978)

Current futures levels:

* Sep 2-Yr futures (TU) up 9.75/32 at 107-11.875 (L:107-02.625/H:107-12.25)

* Sep 5-Yr futures (FV) up 18.25/32 at 117-14 (L:116-28.5/H:117-14.75)

* Sep 10-Yr futures (TY) up 26.5/32 at 126-27 (L:126-02/H:126-28)

* Sep 30-Yr futures (US) up 1-17/32 at 153-31 (L:152-16/H:154-00)

* Sep Ultra futures (WN) up 2-16/32 at 176-06 (L:173-27/H:176-09)

MONTH-END EXTENSIONS: *** FINAL Bloomberg-Barclays US month-end index

extension/forecast summary compared to the average increase for the past year

and the same time in 2018; TIPS 0.02Y; Govt inflation-linked, 0.02Y

*.....................Projected...1Y Avg Incr..Last Year

*US Tsys.................0.11........0.08........0.11

*Agencies................0.01........0.11........0.08

*Credit..................0.08........0.08........0.11

*Govt/Credit.............0.10........0.08........0.11

*MBS.....................0.05........0.06........0.07

*Aggregate...............0.09........0.08........0.09

*Long Govt/Credit........0.10........0.09........0.15

*Interm Credit...........0.08........0.07........0.08

*Interm Govt.............0.08........0.08........0.09

*Interm Govt/Cred........0.08........0.08........0.09

*High Yield..............0.04........0.06........0.08

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

hit a likely air pocket on it's way to session highs earlier as 3 rate-cut

chatter before year end gained momentum. Current White pack (Jun 19-Mar 20):

* Jun 19 +0.042 at 97.527

* Sep 19 +0.110 at 97.750

* Dec 19 +0.145 at 97.910

* Mar 20 +0.160 at 98.120

* Red Pack (Jun 20-Mar 21) +0.140 to +0.155

* Green Pack (Jun 21-Mar 22) +0.105 to +0.125

* Blue Pack (Jun 22-Mar 23) +0.075 to +0.095

* Gold Pack (Jun 23-Mar 24) +0.065 to +0.075

US DOLLAR LIBOR: Latest settles resume 

* O/N -0.0032 at 2.3545% (-0.0020/wk)

* 1 Month -0.0095 to 2.4305% (+0.0024/wk)

* 3 Month -0.0177 to 2.5025% (-0.0224/wk)

* 6 Month -0.0271 to 2.5166% (-0.0320/wk)

* 1 Year -0.0679 at 2.5102% (-0.1088/wk)

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

* Daily Effective Fed Funds Rate: 2.39%, volume: $60B

* Daily Overnight Bank Funding Rate: 2.37%, volume: $158B

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

* Secured Overnight Financing Rate (SOFR): 2.40%, $1.083T

* Broad General Collateral Rate (BGCR): 2.39%, $474B

* Tri-Party General Collateral Rate (TGCR): 2.39%, $449B

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

03-Jun  -   May NA-made light vehicle sales SAAR (7.1m, --)

03-Jun 0945 May Markit Mfg Index (final) (50.6, 50.6)

03-Jun 1000 Apr construction spending (-0.9%, 0.4%)

03-Jun 1000 May ISM Manufacturing Index (52.8, 52.9)

03-Jun 1325 StL Fed Pres Bullard, US Economy, Mon-Pol, Union League Club,

Chicago, Q&A

03-Jun 2145 SF Fed Pres Mary Daly, Symposium on Asian Banking/Finance, Singapore

PIPELINE: Only $5.2B priced on week, well off $20B estimate, 

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

No new issuance Friday

- 

$1.9B priced Thursday

05/30 $1.25B *BoNY Mellon 2NC1 FRN L+28

05/30 $350M *Southern California Gas WNG 30Y +130

05/30 $300M *Entergy Mississippi WNG 30Y +127

Eurodollar/Tsy options:

Eurodollar options, Pit/screen:

+25,000 short Jun 80 puts, 1.5

24,000 Dec 78/83 call spds

BLOCK, 1545:43ET

* 12,500 short Dec 85/87 1x2 call spds, 1.5

BLOCK, 1442:11ET -- adding to earlier

* 5,000 Green Dec 81/85 2x3 call spds vs. 15,000 Green Dec 76 puts

* +20,000 Aug 76/78 call over risk reversals, 1.5

* +10,000 Jun 76 calls, 1.0

* +10,000 Dec 71/73 put spds, 1.0

* 15,000 short Dec 85/88 1x2 call spds

* +5,000 Red Sep 91/96

* +7,500 Blue Sep 73/76 2x1 put spds, 1.0

* +8,000 Blue Jul 76 puts, 1.0

* -7,500 Mar 78/81 call spds, 11.0 vs. 98.02/0.10%

BLOCKs,

* 10,000 Green Dec 73/82 (yes, the deep in the-money calls), 63.0 at 1334:04

Package similar to earlier Block:

* 10,000 Green Dec 81 calls, 26.0 vs.

* 15,000 Green Dec 85 calls, 11.5 vs.

* 15,000 Green Dec 76 puts, 3.0

ongoing call spd buyer vs. puts

* appr +75,000 Sep 77/78 call spds 1.0 over the Jul 76 puts vs. 97.705/0.44%

BLOCK, 1207:39ET,

* 20,000 short Aug 87/88 call spds, 1.5 vs. 98.265

BLOCK, 0936-0944ET,

* total 30,000 Sep 77/78 call spds 1.0 over the Jul 76 puts vs. 97.71/0.44%

* Update, 75,000 short Oct 87/90 call spds, 3.0 vs. 98.24/0.09%

* Update, 50,000 short Aug 87/88 call spds, 2.0 vs. 98.23/0.05%

* over 35,000 Sep 72/75 put spds, 1.0 on screen

* +25,000 Blue Sep 76 puts, 2.0

* 5,000 Dec 78/80/81 1x3x2 call flys, 2.0 net /belly

* +20,000 Sep 72/75 put spds, 1.0

* +27,000 Dec 77/80 call spds, 10.0

* >+5,000 Dec 71/72/73/75 put condors

* +10,000 short Jul 75 puts, 1.0

* -6,500 Jul 76/77 call spds, 5.5

* total +75,000 (25k Blocked) Green Dec 73 puts, 1.5 vs. 98.175

* +23,000 Sep 76/77 call spds vs. 34,500 Sep 75 puts, 7.5-8.5 on the 2x3 package

* +7,500 Green Sep 81/83 call spds, 11.0

* +15,000 Green Dec 81/83 call spds vs. 22,500 Green Dec 76 puts, 12.5 net on

2x3

* +5,000 Sep 76/77 call spds vs. Sep 76 puts, 0.0

Tsy options, Pit/screen:

* 4,000 FVU 120/121 call spds, 3.5/64 vs. 117-11.25

* +8,300 TYQ 121/121.5 put strips, 4/64

Odd ratio calendar-spread package:

* 8,600 TYU 133 calls, 5/64 w/

* 3,750 TYU 133.5 calls, 5/64 w/

* 6,629 TYN 129 calls, 4/64 vs.

* 18,980 TYN 131.25 calls, 1/64

* Update, over +65,000 TYQ 121.5 puts, 2/64 mostly in pit, paper still sizing up

offers

* Update, over 30,000 TYN 132.25/TYQ 123.5 call spds, 3/64

* -5,000 TYN 128 calls, 10/64 earlier

Earlier Block, 1037:37ET

* -9,283 TYN 125 calls, 1-36/64 vs.

* +13,858 TYQ 127 calls, 46/64

* 7,000 FVN 116/116.5 2x1 put spds, 3.5

* 1,500 FVQ 116/118 strangles, 26/64

* 5,000 TYN 124.5/125.25 2x1 put spds, 4/64

* 5,000 TUQ 106.5/106.75 2x1 put spds, .5/64

* 1,500 wk2 TY 124.2/125.2 2x1 put spds, 4/64

* 1,500 USN 149/150.5 2x1 put spds, 4/64

* 3,200 TYN 127.5 calls, 18/64 vs. 126-18.5/0.25%

* +5,000 TYU 124 puts, 14/64

* over 5,000 TYQ 128 calls, 26/64

* +3,000 TYN 122 puts. cab-5

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

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