US TSYS: WHO WANTS TO BE SHORT SAFE HAVENS INTO LONG WEEKEND?

US TSY SUMMARY: Rates recovered, extended NY session highs on heavy month end

buying, almost 20% of session volume trades in TYZ in the 5 minutes leading up

to the pit close. Decent block buys in 2s, 5s, 10s and ultra-bonds supported

move. After the bell, 30YY down to 1.9573% on the move, still no where near

Wed's all-time low of 1.9052%.

- Trade and geopol risks underpinning rates as Tsys clawed back to mildly higher

levels by midmorning, equities pared gains/trade lower late. Who wants to be

short safe havens ahead long weekend?

- Two-way flow on net, early flattener unwinds in short end vs. 10s, swap-tied

buying in 2s,3s and 4s selling in 10s. No new deal-tied hedging, moderate option

related flow.

- Markets still price in 100% chance of a 25bp rate cut at the September 17-18

FOMC, but chances of a 50bps cut have slipped back to around the mid-teens from

54.9% a week ago.

- The 2-Yr yield is down 1.6bps at 1.504%, 5-Yr is down 1.1bps at 1.3849%, 10-Yr

is up 0.2bps at 1.4961%, and 30-Yr is down 0.3bps at 1.9613%. 

US TSY FUTURES CLOSE: Last minute month end buying saw futures make new NY

session highs by the bell, almost 20% of session volume trades in TYZ in the 5

minutes leading up to the pit close. Levels recede slightly in minutes after the

bell. Some decent block buys in 2s, 5s and ultra-bonds supported move. Update: 

* 3M10Y  +0.873, -48.652 (L: -51.145 / H: -45.437)

* 2Y10Y  +2.028, -0.917 (L: -3.282 / H: 0.201)

* 2Y30Y  +1.458, 45.463 (L: 42.806 / H: 47.969)

* 5Y30Y  +0.912, 57.519 (L: 55.585 / H: 59.059)

Current futures levels:

* Dec 2-Yr futures up 1.25/32 at 108-1.625 (L: 107-30.875 / H: 108-02.125)

* Dec 5-Yr futures up 2.75/32 at 119-31 (L: 119-24.25 / H: 120-00.25)

* Dec 10-Yr futures up 3.5/32 at 131-23.5 (L: 131-13 / H: 131-26)

* Dec 30-Yr futures up 4/32 at 165-12 (L: 164-14 / H: 165-22)

* Dec Ultra futures up 13/32 at 197-20 (L: 195-24 / H: 198-04)

US EURODLR FUTURES CLOSE: Late month end buy scramble in addition to position

squaring on decent volume ahead extended holiday weekend. Current White pack

(Sep 19-Jun 20): 

* Sep 19 -0.010 at 97.938

* Dec 19 +0.010 at 98.140

* Mar 20 +0.020 at 98.450

* Jun 20 +0.025 at 98.605

* Red Pack (Sep 20-Jun 21) +0.020 to +0.025

* Green Pack (Sep 21-Jun 22) +0.020 to +0.025

* Blue Pack (Sep 22-Jun 23) +0.025 to +0.030

* Gold Pack (Sep 23-Jun 24) +0.020 to +0.025

US DOLLAR LIBOR: Latest settles

* O/N -0.0054 at 2.0896% (+0.0013/wk)

* 1 Month -0.0112 to 2.0890% (-0.0505/wk)

* 3 Month +0.0059 to 2.1376% (-0.0067/wk)

* 6 Month +0.0051 to 2.0365% (-0.0436/wk)

* 1 Year +0.0126 at 1.9740% (-0.0546/wk)

US SWAPS: Spds running mostly tighter, 2Y balanced at even while rest of curve

extends inversion, ignoring Tsy bounce off lows. Rather limited flow includes

receiver in 2s around 1.520-.529%, receivers in 3s and 4s, payer in

10s. 

- TD Securities offers up plausible opinion on inversion extension that the

Treasury bringing up ultra-long debt past what's currently available is their

attempt at steepening yld curves after 2Y10Y inverted for first time in over 12

years last couple weeks. 

- TD is in line w/other researchers that demand for new ultra-long issues is

limited, while "any issuance will come cheap to the curve and tighten swap

spreads. Any knee-jerk steepening should be overshadowed by macro fundamentals

and Fed policy." Latest spd levels:

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

Fri 1500    +0.88/+0.38    -0.62/-6.94   -1.00/-11.50   -1.06/-41.94

1200        +0.81/+0.31    -0.81/-7.12   -1.00/-11.50   -1.50/-42.38

1030        +0.50/+0.00    -0.69/-7.00   -0.69/-11.19   -1.44/-42.31

Fri Open    +0.56/+0.06    -0.25/-6.56   -0.50/-11.00   -0.88/-41.75

Thu 1500    +0.81/-0.12    +0.50/-6.56   -0.25/-10.69   -0.25/-41.00

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

* Daily Effective Fed Funds Rate: 2.12%, volume: $62B

* Daily Overnight Bank Funding Rate: 2.11%, volume: $167B

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

* Secured Overnight Financing Rate (SOFR): 2.12%, $1.196T

* Broad General Collateral Rate (BGCR): 2.11%, $510B

* Tri-Party General Collateral Rate (TGCR): 2.11%, $447B

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

03-Sep  -   Aug NA-made light vehicle sales SAAR 

03-Sep 0945 Aug Markit Mfg Index (final) (49.9, 50.0)

03-Sep 1000 Jul construction spending (-1.3%, 0.3%)

03-Sep 1000 Aug ISM Manufacturing Index (51.2, 51.2)

03-Sep 1000 Sep IBD/TIPP Optimism Index (55.1, --)

03-Sep 1700 Boston Fed Pres Rosengren, US economy, Stonehill College, Easton, MA

PIPELINE: Quiet end to week, $10.75B total issuance, $89.975B for month

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

08/30 Nothing new on the pipeline Friday

-

08/29 $3B *BNG Bank 3Y +18 

Chatter of coming issuance:

09/?? $Benchmark HSBC Bank Canada 

09/?? $Benchmark Export/Import Bank of India

09/?? $Benchmark Ontario Teachers Finance Trust

09/?? $Benchmark T-Mobile US

09/?? $Benchmark KEB Hana Bank

Eurodollar/Tsy options:

Eurodollar options, Pit/screen: 

* -5,000 Oct 81 straddles, 20.0

* +5,000 Oct 78 puts, 1.5

* Update, +10,000 Jun 88/90 call strips, 28.0

* +11,500 short Sep 85/86/87/88 call flys, 7.0 covered

* 4,500 Jun 92/95 call spds, 4.0

* +8,000 Sep 78 puts, 1.0

* Update, total +10,000 Red Dec'20 66 puts, 0.5

* 5,000 Blue Dec 85 puts, 8.0 vs. 98.73/0.28%

* +5,000 Red Dec'20 66 puts, 0.5

* 4,000 Nov 81/82/83 call flys, 1.5 vs. 98.14

* 1,000 Red Mar21 80/87 3x2 put spds, 42.5 vs. 98.80

* 8,500 short Dec 75/80 put spds, 1.0

* 4,500 Nov 82/83/85 call flys, 1.25

* 5,000 Dec 85 calls, 5.0

* 3,000 Mar 87/90/93 broken call flys, 1.5 net vs. 98.47/0.10%

* +6,500 Sep 80/81 call spds, 1.25 vs. 97.935/0.19, adds to 10k Block

Blocks, 0717-0714ET, still offered

* total +10,000 Sep 80 calls, 1.5

Block, 0508:50ET

* 10,000 Sep 80/81 call spd, 1.25

Tsy options:

* +50,000 TYV 129/131 put spds, 20/64

* 9,700 TYV 129.5/130.5 put spds, 10/64 vs. 139-19

* -3,500 TYV 131.5 straddles, 1-19/64

* 3,000 TYX 130 puts, 25/64 vs. 131-18 earlier

* 10,000 TYV 130.5 puts, 15/64 on screen, total volume just over 20k.

* Note, while there has been a noticeable pick-up in put buying this wk, upside

calls continue to trade at premium vs. corresponding puts across all

expiries/durations after long end ylds fell to new all-time lows this wk.

* 4,600 TYZ 135 calls, 17/64 vs. 131-14.5 to -14/0.16%

* +3,000 TYZ 130 puts, 25/64 vs. 131-18/0.25%

* 1,000 TYV 131.5 straddles, 1-17/64

* 1,000 FVZ 119.75 straddles, 1-27.5/64

* +3,000 wk5 FV 120 calls 1/64 on screen earlier

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

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