Analysts at Morgan Stanley expect that.....>

US SWAPS: Analysts at Morgan Stanley expect that Formosa issuance in January

should be in the region of $5-8bln. These are bonds that are mostly callable,

issued in Taiwan and mostly in dollars. Historically, they have had a

significant influence upon long dated implied vols and more so vega.

- They believe that even though issuance is lighter compared to previous years

"future issuance is still likely to pressure vega" but "recent tightening of the

vol spread between 5y30y - 10y20y is worth fading".

- In terms of trade suggestions "To us, it's a "mystery" why 10y20y did not

follow 5y30y in the move lower. On the flip side, 5y30y should be more supported

if forward vol buying picks up in 2018. We recommend buying 5y30y versus selling

10y20y in a vega neutral structure for 0 cost."