US TSYS: Virus Vaccine, US/CHINA Geopol Risk Ebb/Flow

US TSY SUMMARY: Virus-related headlines and US/China geopolitical risk largely

drove market moves Wednesday -- risk-on the underlying gist: Tsys weaker (but

off lows late) and equities higher (off highs) after breaching resistance:

3226.25 set Mon vs. 3233.25 session high.

- Early risk-on triggered by better than expected data (June import prices rose

1.4%) and encouraging Oxford Covid-19 vaccine trial headlines after positive

notes on Moderna vaccine late Tuesday that buoyed equities.

- Early risk appetite gradually sold into midday as US/China headlines stirred

geopol risk (sanctions, Pompeo rhetoric, Trump exec order ending HK special

status).

- Risk-on green lighted again in second half after Bbg headline heralded Trump

"DOESN'T WANT TO ESCALATE CHINA TENSIONS". Equities continued to inch higher

late (ESU0 3219.5, +36.0).

- Two-way flow on more moderate volumes, supply muted as earning season kept

issuers sidelined. The 2-Yr yield is down 0.4bps at 0.153%, 5-Yr is down 0.6bps

at 0.2834%, 10-Yr is up 0.3bps at 0.6266%, and 30-Yr is up 1.9bps at 1.3295%.

TECHNICALS:

US 10YR FUTURE TECHS: (U0) Bullish Outlook Intact      

*RES 4: 140-02   0.764 projection of Jun 5 - 11 rally from Jun 16 low

*RES 3: 140-00   Psychological round number

*RES 2: 139-25   Contract high, Mar 25

*RES 1: 139-22+ High Jul 10 & 0.618 proj. of Jun 5 - 11 rally from Jun 16 low

*PRICE: 139-10 @ 16:10 BST Jul 15

*SUP 1: 138-23+ Low Jul 2 and key near-term support

*SUP 2: 138-07   Low Jun 16 a reversal trigger  

*SUP 3: 137-22   Low Jun 10

*SUP 4: 136-22   Low Jun 5 and primary support 

10yr futures continue to trade below the Jul 10 high. Despite the recent

pullback form this high, a bullish outlook remains in place. The contract

recently cleared 139-16, Apr 21 high. This signals the end of the broad sideways

move that has dominated price action since April. The break paves the way for a

test of major resistance at 139-25, Mar 25 high. A break here would resume the

broader uptrend, exposing 140-00 initially. Key support remains 138-23+.

AUSSIE 10-YR TECHS: (U0) Fading

*RES 3: 99.3600 - High Apr 02

*RES 2: 99.2250 - High Apr 17 

*RES 1: 99.1400 High Jul 10 

*PRICE: 99.1000 @ 16:11 BST, Jul 15

*SUP 1: 99.0200 - Low Jul 2 and 3 

*SUP 2: 98.9725 - 50.0% retracement of the Jun 8 - 29 rally

*SUP 3: 98.9342 - 61.8% retracement of the Jun 8 - 29 rally

Aussie 10yr futures started the week poorly, but remain inside recent ranges and

are yet to test any key support levels. This keeps the focus on initial key

resistance at 99.1350, Jun 29 high where a break would open 99.2250, Apr 17

high. On the downside, initial key key support has for now been defined at

99.0200. A break of this level would expose a deeper decline towards 98.9725, a

Fibonacci retracement.

JGB TECHS: (U0): Still Below Mid-June Highs

*RES 3: 153.50 - High Mar 16 

*RES 2: 153.06 - High Mar 31 and key resistance

*RES 1: 152.29 - HIgh Jun 12 / Jul 10

*PRICE: 152.22 @ 16:12 BST, Jul 15

*SUP 1: 151.18 - Jun 8 low

*SUP 2: 150.61 - Low Mar 19 and key support

*SUP 3: 150.50 - 1.0% 10-dma envelope

The uptrend in JGBs extended further Wednesday to secure the move back above

152. This still remains below last week's and the mid-June highs of 152.29,

however, with this level becoming the first upside target. The recovery off

151.57 has persisted and signals scope for a rally through 152.29 to open 153.06

initially. The rally through the 50-dma at 152.16 represents a bullish

development. Key supports for now has been defined at 151.18. 

TSY FUTURES CLOSE: Mostly weaker, well off early lows with short end holding

steady by the bell -- yld curves still steeper but off higher levels. As with

short end rates, ebb and flow in Tsy futures largely triggered by virus vaccine

and US/China geopolitical risk headlines with risk-on the underlying gist.

Update: 

* 3M10Y  +1.253, 49.135 (L: 46.808 / H: 51.422)

* 2Y10Y  +1.088, 47.327 (L: 46.014 / H: 49.521)

* 2Y30Y  +2.649, 117.579 (L: 114.614 / H: 119.439)

* 5Y30Y  +2.688, 104.585 (L: 101.764 / H: 105.298); Current futures levels:

* Sep 2-Yr futures down 0.125/32 at 110-12.875 (L: 110-12.25 / H: 110-13.25)

* Sep 5-Yr futures down 0.5/32 at 125-24.25 (L: 125-20.75 / H: 125-25.5)

* Sep 10-Yr futures down 2.5/32 at 139-11 (L: 139-03.5 / H: 139-14)

* Sep 30-Yr futures down 19/32 at 179-22 (L: 179-03 / H: 180-06)

* Sep Ultra futures down 1-10/32 at 221-19 (L: 220-14 / H: 222-24)

US TSYS/SUPPLY: US Tsy bill/note auctions for week. 

DATE     TIME   AMOUNT   SECURITY    (CUSIP)/ANNC  AWARDED

----------------------------------------------------------

13 Jul  1130ET   $54B   13W Bill      (9127962R9)   0.145%

13 Jul  1130ET   $51B   26W Bill      (9127963U1)   0.145%

14 Jul  1130ET   $35B   42D Bill R/O  (912796XG9)   0.120%

14 Jul  1130ET   $35B  119D Bill R/O  (9127962Z1)   0.145%

14 Jul  1300ET   $34B   52W Bill      (9127963S6)   0.155%

15 Jul  1130ET   $25B  105D Bill R/O  (9127964Q9)   0.130%

15 Jul  1130ET   $30B  154D Bill R/O  (9127965D7)   0.145%

16 Jul  1130ET   $35B    4W Bill      (9127963P2)

16 Jul  1130ET   $35B    8W Bill      (9127963Y3)

US EURODLR FUTURES CLOSE: Weaker across the strip but off early lows by the

bell, top half of range. Ebb and flow largely triggered by virus vaccine and

US/China geopolitical risk headlines with risk-on the underlying gist. Current

White pack levels:

* Sep 20 -0.010 at 99.735

* Dec 20 -0.010 at 99.690

* Mar 21 -0.005 at 99.790

* Jun 21 -0.015 at 99.805

* Red Pack (Sep 21-Jun 22) -0.015 to -0.01

* Green Pack (Sep 22-Jun 23) -0.01 to -0.005

* Blue Pack (Sep 23-Jun 24) -0.01 to -0.005

* Gold Pack (Sep 24-Jun 25) -0.015 to -0.01

US DOLLAR LIBOR: Latest settles: 

* O/N +0.0067 at 0.0842% (+0.0028/wk)

* 1 Month +0.0042 to 0.1808% (+0.0054/wk)

* 3 Month +0.0020 to 0.2729% (+0.0047/wk)

* 6 Month -0.0067 to 0.3346% (-0.0107/wk)

* 1 Year -0.0041 to 0.4769% (-0.0032/wk)

US SWAPS: Spds steady to marginally mixed -- not a lot of flow to report on the

narrow range, little to no deal-tied hedging w/issuers sidelined around latest

earnings season. Latest levels:

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

Wed 1545  +0.12/+6.75    +0.31/+3.81    +0.00/-2.00    -0.12/-46.75

Wed Open  +0.38/+7.00    +0.12/+3.62    -0.38/-2.38    -0.38/-47.00

Tue 1500  +0.25/+6.44    -0.25/+3.25    -0.12/-1.88    +0.06/-46.44

Tuesday recap: Marginally mixed -- intermediates tighter vs. wider wings after

the bell. Spd curve steepeners late as long end reversed tighter levels for much

of the session. Modest deal-tied flow in the mix.

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

* Daily Effective Fed Funds Rate: 0.09% volume: $54B

* Daily Overnight Bank Funding Rate: 0.09%, volume: $141B

US TSYS: REPO REFERENCE RATES 

* Secured Overnight Financing Rate (SOFR): 0.11%, $972B

* Broad General Collateral Rate (BGCR): 0.09%, $397B

* Tri-Party General Collateral Rate (TGCR): 0.09%, $372B

FED: NY Fed operational purchase

* Tsy 7Y-20Y, $3.601B accepted of $11.451B submitted

Balance of week's schedule:

* Thu 07/16 1010-1030ET: TIPS 7.5Y-30Y, appr $1.125B

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

16-Jul 0830 11-Jul jobless claims (1.314M, 1.250M)

16-Jul 0830 4-Jul Continuing Claims (18.062M, 17.500M)

16-Jul 0830 Jul Philadelphia Fed Mfg Index (0.3, --)

16-Jul 0830 Jul NY Fed Business Leaders Index

16-Jul 0830 Jun retail sales (17.7%, 5.0%) ex. MVs (12.40%, 5.0%)

16-Jul 0830 Jun retail sales ex. mtr veh, gas (12.40%, 5.0%)

16-Jul 1000 Jul NAHB home builder index (58, 61)

16-Jul 1000 May business inventories (-1.3%, -2.3%)

16-Jul 1030 10-Jul natural gas stocks w/w

16-Jul 1100 Chi Fed Pres Evans, Rocky Mountain eco-summit

16-Jul 1110 NY Fed Pres Williams, fncl research advisory

16 Jul 1130 TBA 4W Bill 14 Jul Annc 

16 Jul 1130 TBA 8W Bill 14 Jul Annc

16-Jul 1600 May net TICS flows ($125.3B, --); L/T (-$128.4B, --)

16-Jul 1630 15-Jul Fed weekly securities holdings

PIPELINE: Alberta priced while Quebec looks to issue Thursday

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

07/15 $2B *Provence of Alberta 10Y +72

On tap for Thursday

07/16 $Benchmark Quebec 5Y +33a

Eurodollar/Tsy options

EURODLR OPTIONS:

* +2,000 Mar 98/100/100.12 call flys, 0.5, more offered after

* some 7,000 Red Sep'21 98/100/100.12 call flys traded same level recently

* Update 14,650 Sep 92/100 risk reversals, 0.0 (cab on both legs)

* 10,500 Sep 92/100 risk reversals, 0.0 (cab on both legs)

* +4,000 Green Oct 91/93/95 put flys, 0.0

* 3,000 Green Mar 95 puts over Green Mar 97/98 call spds, ongoing, paper +puts

2.5 over call spd near 5k Tuesday

* Update, total 37,700 Green Dec 95 puts, 4.5 (OI 102,161 coming into the

session), option desks say buy

* 28,000 Green Dec 95 puts, 4.5

* 6,500 long Red Jun'22 93/96/97 put flys

* Update, +21,000 Dec 97/98/100 call flys, 1.5

scale buyer limited upside call fly buyer

* Update, +21,000 Dec 97/98/100 call flys, 1.5

* Green Sep 93 put volume up to 14,500

* 5,300 Green Sep 95 puts, 0.5

* 4,000 Green Sep 96/97 put spds vs. Blue Sep 95/96 put spds, 1.5/Blues over

TSY OPTIONS:

* 11,000 USU 162 puts, 2/64, OI less than 2k coming into session, opener

* 7,000 TYU 147.5 calls, 1/64

* +2,500 TYU 137 puts, 5/64

* 2,000 USQ 181/183/185 call flys, 13/64

* small sellers FVQ 125.75 straddles, 13.5/64 recently,

* -2,000 TYU 136.5/141.5 strangles, 9/64

* 3,350 TYQ 138.25 puts, 5/64 total volume just over 7.7k

* over 6,700 TYU 133.5 puts, 1.0, ongoing, paper +12.5k Tue, OI lower

* +3,700 TYQ 138.25 puts, 5/64

* small seller TYU 138.5/140 strangle earlier at 36/64

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

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