US TSYS: YIELD CORRELATION W/ US$/YEN BACK IN PLAY

US TSY SUMMARY: Tsys hold lower levels by the bell, off lows after extending

past late O/N lows as US$/Yen tops 110.40. Generally quiet, little react to data

(weekly claims +9k to 227k), 10YY climbed to 2.844% after StL Fed Pres Bullard

said productivity growth "could surprise". Lull in month-end buying that helped

push Tsy ylds lower Wed.

- US$ index rebounds late (DXY +0.072 to 95.362; US$/Yen new session highs

(110.63); equities surged (emini +18.0, 2723.0); gold weaker (XAU -4.94,

1247.35); West Texas crude continues to gain (WTI .52, 73.28 after tapping

74.03, new year high/revisits 2014 high).

- Tsys receded w/bounce in US$/Yen, program and fast$ sales in belly,

pre-auction short sets ahead $30B 7Y auction, light HG corp flow), option-tied

hedging, two-way positioning ahead Fri's PCE data -- accts eying sidelines ahead

next wk's 4th of July holiday. Swap spds still wider but off earlier highs, spd

curve off flats amid decent steepener flow, rate paying in 5s, 6s and 10s. Tsy

cash/ylds: 2Y 99-30.62 (2.520%), 5Y 99-17 (2.724%), 10Y 100-08 (2.844%), 30Y

102-29.5 (2.976%).

US TSY FUTURES CLOSE: Just off late new session lows as US$/YEN continues to

climb to new session highs now (+.38, 110.64), equities climbing higher, Curves

mixed, update:

* 2s10s +0.366, 32.319 (31.750L/34.015H);

* 2s30s -0.653, 45.470 (45.314L/48.284H);

* 5s30s -2.084, 24.953 (24.875L/27.596H);

Current futures levels:

* Sep Ultra bonds down 09/32 at 159-21 (159-16L/160-02H)

* Sep 30-yr Bond futures down 09/32 at 145-00 (144-29L/145-11H)

* Sep 10-yr futures down 06/32 at 120-6.5 (120-05L/120-14.5H)

* Sep 5-yr futures up 3.5/32 at 113-20.75 (113-19.75L/113-25.5H)

* Sep 2-yr futures up 1.5/32 at 105-29.75 (105-29.5L/105-31.75H)

MONTH-END EXTENSIONS: Updated Bloomberg-Barclays US month-end index exten's

compared to avg increase for past yr and same time in 2017. US TIPS (Series-L)

empirical extension at 0.06 years and real extension at 0.08 years. US

Government Inflation-Linked (Series-B) Index extension at 0.07 years

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

*US Tsys.................0.06........0.06........0.04

*Agencies................0.10........0.08........0.06

*Credit..................0.09........0.04........0.04

*Govt/Credit.............0.08........0.06........0.04

*MBS.....................0.07........0.05........0.15

*Aggregate...............0.07........0.05........0.07

*Long Govt/Credit........0.04........0.00.......-0.04

*Interm Credit...........0.07........0.04........0.03

*Interm Govt.............0.07........0.03........0.03

*Interm Govt/Cred........0.06........0.03........0.03

*High Yield..............0.04........0.01........0.00

US EURODOLLAR FUTURES CLOSE: Trading steady to mildly lower, at or near session

lows with a parallel shift across Reds through Golds. Current White pack

(Sep'18-Jun'19):

* Sep'18 0.000 at 97.550

* Dec'18 -0.005 at 97.365

* Jun'19 -0.015 at 97.245

* Jun'19 -0.020 at 97.150

* Red pack (Sep'19-Jun'20) -0.025-0.020

* Green pack (Sep'20-Jun'21) -0.030-0.025

* Blue pack (Sep'21-Jun'21) -0.030-0.025

* Gold pack (Sep'22-Jun'22) -0.025

US DOLLAR LIBOR: Latest settles,

* O/N -0.0005 to 1.9332% (+0.0052/wk)

* 1 Month -0.0014 to 2.0921% (-0.0056/wk)

* 3 Month +0.0030 to 2.3373% (-0.0015/wk)

* 6 Month +0.0006 to 2.5012% (-0.0063/wk)

* 1 Year +0.00063 to 2.7631% (-0.0137/wk)

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

* Secured Overnight Financing Rate (SOFR): steady at 1.90%, $760B

* Broad General Collateral Rate (BGCR): 1.88% vs. 1.89%, $355B

* Tri-Party General Collateral Rate (TGCR): 1.88% vs. 1.89%, $343B

US SWAPS: Spds mixed by the bell, wings mildly wider vs. tighter intermediates,

spd curve well off flatter levels from the first half. In-line flow: decent

steepener flow over last hour: 2s and 3s vs. 5s, 3s8s, 5s10s and 6s7s, rate flow

includes paying in 5s (2.86375%), 6s (2.870%), and 10s (2.91024%), receiver in

7s (2.87625%). Earlier flow included rate paying in 2s at 2.7695% earlier and

2s5s flatteners; steepeners in short intermediates: 5s7s and 7s8s. Latest spd

levels:

* 2Y  +0.44/26.06

* 5Y  -0.38/14.88

* 10Y -0.06/7.31

* 30Y +0.44/-5.44

PIPELINE: Slow week for supply, $2.65B so far

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

06/28 $1.027B Community Health systems 5.5NC2.5, 8.75%a

-

$1.75B priced Wednesday

06/27 $1B *Municipality Finance 3Y +3

06/27 $750M *Transocean 5.5NC3

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

- Jun 29 May personal income (0.3%, 0.4%) 0830ET

- Jun 29 May current dollar PCE (0.6%, 0.4%) 0830ET

- Jun 29 May total PCE price index (0.2%, 0.2%) 0830ET

- Jun 29 May core PCE price index (0.2%, --) 0830ET

- Jun 29 Jun ISM-Milwaukee Mfg Index (67.9, --) 0900ET

- Jun 29 Jun MNI Chicago PMI (62.7, 60.1) 0945ET

- Jun 29 Jun Michigan sentiment index (f) (99.3, 99.3) 1000ET

- Jun 29 Q2  St. Louis Fed Real GDP Nowcast ( %, --) 1100ET

- Jun 29 Q2  NY Fed GDP Nowcast ( %, --) 1115ET

- Jun 29 16/17 grain stocks 1200ET

Eurodollar/Treasury Option Summary

Eurodollar options, Pit/screen:

* +15,000 Sep 76/77 1x2 call sprd at 0.75

* -5,000 Dec 63/65/66/67 put Condor vs Short Dec 78 call for net 0.5

* +4,000 Short Jul 71/72/73 call fly vs Short Jul 70 put for net 0.5

* 10,000 Dec 72/73 put sprd at 6.5 vs 9735/0.10%

* -10,000 Sep 73 put at 0.5 vs 9751/0.05%

* -5,000 Long Green Sep 66/70 2x1 put sprd at 2

* 10,000 Short Aug 72 calls at 4.5 vs 9711.5/0.26%

* 6,000 Oct 75/76 call sprd at 1.75 vs 9736.5/0.10%

* +14,000 Blue Mar 70 Straddle at 49

Block, 8:53ET, adds to 20k in pit

* +12,500 Green Dec 66/68 put strip at 16.5 vs 9706/0.53%

* 10,000 Dec 75/76 put sprd at 10.5 vs 9735/0.12%

Tsy options, Pit/screen:

* +3,000 TYQ 121 calls, 16/64vs. 120-10.5

* 1,600 TYQ 120.5 calls, 25/64 vs. 120-08/0.42%

Flurry of 5Y options over last few minutes:

* 2,750 FVU 112.7/114.5 call over risk reversals, 4.5/64 vs. 113-23/0.40%

* 2,500 FVQ 114 calls, 13.5/64 vs. 113-23

* 2,000 FVU 114/115.25 1x2 call spds, 10.5/64

* 1,600 TYU 122.5 calls at 9/64 w/ 1,200 TYU 123 calls at 14/64

* 1,500 TYU 120/122 1x2 call spds, 29/64

* 3,635 FVU 112.25/113/113.75 put flys on screen

* over 2,000 TYU 120.5 straddles bought at 1-30/64

* 1,400 TYQ 120 calls, 7/64 vs. 120-13

* 500 USU 140/143 2.5x1 put spds, 10/64 net

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

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