US TSYS: WEAKER TSYS AND NEW LOWS TSY YIELD CURVES

US TSY SUMMARY: Tsys trading mildly weaker, near middle of range. Anemic volume

w/appr 870k TYU by the bell. Second consecutive day of quiet early summer trade

w/second tier data, $33B 3Y note auction tailed slightly (awarded a 2.685% rate

vs. 2.680% WI). Headline watching rather boring as US Pres Trump departs for

NATO summit today. PPI Wed, CPI Thu, Fed to release chairman Powell's Semiannual

monetary policy report to Congress at 1100ET Friday, July 13.

- US$ index little higher/pared earlier gains (DXY +0.062 to 94.138; US$/Yen

higher +.41 111.26 (111.35H/110.80L); equities firmer (emini +8.25, 2795.75);

gold little weaker (XAU -1.56 1256.14); West Texas crude rebounds/mildly higher

(WTI +.20, 74.05).

- Limited two-way flow, better selling in short end, deal-tied flow on decent

supply pick-up, 3Y auction hedging. Early fast$ steepeners unwound, FX-tied

selling as US$ held gains vs. Yen. Heavy TYU call option trade (+200k TYU

120/122c spds, 33-35)

- Tsy cash/ylds: 2Y 99-26.5 (2.586%), 5Y 99-10.5 (2.769%), 10Y 100-01.5

(2.867%), 30Y 103-03 (2.967%).

US TSY FUTURES CLOSE: Mildly weaker by the bell, near middle of range. Anemic

volume w/appr 870k TYU by the bell. Second consecutive day of quiet early summer

trade. Current cash 10Y 100-01.5 (2.853%) vs. 100-04.5 (2.856%) late Monday.

Curves moving flatter, new 10-year lows:

* 2s10s -1.775, 27.760 (27.577L/30.239H);

* 2s30s -2.641, 37.653 (37.420L/40.675H);

* 5s30s -1.812, 19.582 (19.426L/21.358H);

Current futures levels:

* Sep Ultra bonds down 3/32 at 159-29 (159-24L/160-05H)

* Sep 30-yr Bond futures down 3/32 at 145-01 (144-30L/145-08H)

* Sep 10-yr futures down 3/32 at 120-01 (120-00L/120-05H)

* Sep 5-yr futures down 3/32 at 113-13.25 (113-12.75L/113-16.75H)

* Sep 2-yr futures down 1.5/32 at 105-25.75 (105-25.75L/105-27.5H)

US EURODOLLAR FUTURES CLOSE: Mildly lower by the close, at/near modest session

lows on light volume. Current White pack (Sep'18-Jun'19):

* Sep'18 -0.010 at 97.535

* Dec'18 -0.015 at 97.330

* Jun'19 -0.015 at 97.200

* Jun'19 -0.020 at 97.100

* Red pack (Sep'19-Jun'20) -0.020

* Green pack (Sep'20-Jun'21) -0.015-0.020

* Blue pack (Sep'21-Jun'21) -0.015-0.010

* Gold pack (Sep'22-Jun'22) -0.015-0.005

US DOLLAR LIBOR: Latest settles,

* O/N -0.0066 to 1.9192% (-0.0064/wk)

* 1 Month -0.0110 to 2.0665% (-0.0197/wk)

* 3 Month +0.0043 to 2.3374% (+0.0061/wk)

* 6 Month +0.0031 to 2.5118% (+0.0037/wk)

* 1 Year +0.0050 to 2.7809% (+0.0022/wk)

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

* Secured Overnight Financing Rate (SOFR): 1.89% vs. 1.93% prior, $784B

* Broad General Collateral Rate (BGCR): 1.87% vs. 1.90% prior, $389B

* Tri-Party General Collateral Rate (TGCR): 1.87% vs. 1.90% prior, $377B

US SWAPS: Spds running mixed by the bell, spd curve steeper vs. continued

flattening in Tsy yld curves, return of swappable corporate supply contributing

to front end narrowing. Midday flow included two-way in intermediates, bank

paying in 30s. Latest spd levels:

* 2Y  -1.12/24.00

* 5Y  -0.44/14.56

* 10Y +0.00/7.88

* 30Y +0.50/-2.75

PIPELINE: Spds running mixed by the bell, spd curve steeper vs. continued

flattening in Tsy yld curves, return of swappable corporate supply contributing

to front end narrowing. Midday flow included two-way in intermediates, bank

paying in 30s. Latest spd levels:

* 2Y  -1.12/24.00

* 5Y  -0.44/14.56

* 10Y +0.00/7.88

* 30Y +0.50/-2.75

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

- Jul 11 06-Jul MBA Mortgage Applications 0700ET

- Jul 11 Jun Final Demand PPI (0.5%, 0.2%) 0830ET

- Jul 11 Jun PPI ex. food and energy (0.3%, 0.3%) 0830ET

- Jul 11 Jun PPI ex. food, energy, trade (0.1%, --) 0830ET

- Jul 11 Fed NY Exec VP Potter, "Global Code Conduct", FX Wk, NY, Q&A. 0955ET

- Jul 11 May wholesale inventories (0.1%, 0.6%) 1000ET

- Jul 11 May wholesale sales (0.8%, --) 1000ET

- Jul 11 Jul Atlanta Fed inflation (2.1%, --) 1000ET

- Jul 11 06-Jul crude oil stocks ex. SPR w/w 1030ET

- Jul 11 Jun Kansas City Fed LMCI (0.83, --) 1100ET

- Jul 11 US TSY $22B 10Y note auction, Jul 16 settle, 1300ET

- Jul 11 NY Fed Pres Williams, Brooklyn Town Hall, Q&A, 1630ET

Eurodollar/Treasury Option Summary

Eurodollar options, Pit/screen:

* +5,000 Dec 71 puts, 1.0 vs. 97.34/0.10%

* +20,000 Green Sep 68 puts, 6.0 vs. 97.01/0.25%

* +2,500 Sep/Dec 72/73/75 put fly spds, 0.5/Dec over

* +20,000 long Green Sep 67/70/72 iron flys, 16.5 earlier as well as

* +25,000 Long Green Mar 55 puts, 3.0

* 10,000 long Green Dec'20 58/62 5x2 put spds, 0.5 (5-leg sold over for net

credit of 0.5 -- adds to appr 10k sold in late June from 1-2.5).

* 5,000 Red Dec'19 70/75 1x2 call spds, 3.5

* +5,000 short Mar 66/67/68 put strip, 36.0 net vs. 96.99/0.88%, adds to Block

Block, 1002:30ET,

* +10,000 short Mar 66/67/68 put strip, 36.0 net vs. 96.99/0.88%

* -15,000 long Green Sep'20 58/62 3x1 put spds, 0.5

* 5,000 Sep 73/75 2x1 put spds, 1.75

* +5,000 long Green Mar 55 puts, 3.0

* ongoing 2-way flow Sep 75 puts, 2.0-2.25 pit/screen

* >+/-18,000 Sep 75 puts, 2.0-2.25 pit/screen

* +3,000 Aug 75 puts, 1.25

* +4,750 short Aug 70/71 strangles, 8.0

* 2,000 Dec 73/75 strangles, 14.5

* 2,000 short Mar 70 straddles, 44.0

* 2,500 long Green Mar'21 70 straddles, 88.0

* +2,000 long Green Dec 60/70 2x1 put spds, 27.5, huge offer

Tsy options, Pit/screen:

Latest trade adding to huge call spd buy on screen

* over +200,000 TYU 120/122 call spds from 33- to 35/64. Last Friday, global

macro acct -100,000 TYU 121/122 call spds, 15/64 -- as a result, open interest

in TYU 121 calls increased appr 89k, TYQ 122 call OI decreased 76k. Back on June

11, paper bought appr 100k TYU 120/122 call spds at 29- to 30/64. Fri's sale

tightens up the call spd, global macro fund now basically long the TYU 120/121

call spd. Acct now long the 120/121/122 3x1x2 call tree.

* 4,000 TYU 118/122 call over risk reversals, 0.0 vs. 120-00

* 1,000 TYQ 120.25 calls, 17/64 vs. 120-02.5

* +350,000 TYU 121/122 call spds at 11/64 after huge call spd buy a few minutes

ago

* 1,500 TYU 120 straddles, 1-12/64 vs. wk2 TY 120/120.25 strangles at 16/64

* 1,000 USQ 146 calls, 24/64

* >+5,000 TYU 118/119 put spds, 9/64 vs. 120-01

* -1,000 TYU 120straddles, 1-12/64

* +1,000 USU 147/149/152 call flys, 12/64 on screen

* 1,800 TYU 121.5 calls, 10/64

* 1,200 TYU 120/121/122.5 1x1.5x1 call flys, 20/64

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

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