US TSYS: 10Y TSY YLD NEAR 4Y HIGH, 2.725%, SoU COMING UP

US TSYS SUMMARY: Rates chopped lower/finish off lows, curves off highs, late

squaring ahead tonight's State of Union address by Pres Trump. Notable, equities

came under heavy pressure (eminis 2818.5 low late morning) amid varying opinions

of over-valuations and talk of portfolio rebalance/buy stocks-sell Tsy

positioning. ECB Knot reiterated QE tapering comments, while Tsy Sec Mnuchin

underscored (if not reiterating) Trump admin's wishes of strong US$.

- Rates made new intra-day lows second half on thin trade, accts hit sidelines

ahead event risk, SoU address, Wed's FOMC and Fri's NFP. Muted react to second

tier data, short end remained buoyed all day. Earlier, sources reported

stop-outs in 30s latest flush lower, prop and real$ selling in 10s and 30s, prop

flattener unwinds. Fast$, prop acct buying on lows. Large buying >50k EDH8 98.13

(+0.010) underpinned short Eurodollar futures.

- OTC and exchange traded option vol perked up briefly, VIX vol index tapped

15.42 (+1.60) first time since mid August. Heavy FI option volume, ongoing long

put profit taking, others added quarterly rate hike insurance.

- Late ylds: 2Y 2.124%, 3Y 2.261%, 5Y 2.509%, 7Y 2.655%, 10Y 2.725%, 30Y 2.976%

     US TSY FUTURES CLOSE: Weaker but off second half lows with accounts paring

shorts/squaring up ahead tonight's State of Union address by Pres Trump. Curves

off earlier highs, latest curve update:

* 2s10s +2.199, 59.527 (60.491H/57.022L);

* 2s30s +2.939, 85.120 (86.760H/82.094L);

* 5s30s +1.663, 46.764 (48.400H/44.638L);

Current futures levels:

* Mar Ultra bonds down 30/32 at 160-28 (160-13L/162-04H)

* Mar 30-yr Bond futures down 24/32 at 147-12 (147-04L/148-11H)

* Mar 10-yr futures down 6/32 at 121-20 (121-17L/121-30.5H)

* Mar 5-yr futures down 1.75/32 at 114-26.5 (114-23.25L/114-31H)

* Mar 2-yr futures up .25/32 at 106-21.5 (106-20L/106-22.25H)

     US EURODOLLAR FUTURES CLOSE: Mostly lower by the bell, short end buoyed

after

heavy buying lifted front quarterly +0.010. Current White pack (Mar'18-Dec'18):

* Mar'18 +0.010 at 98.130

* Jun'18 +0.000 at 97.915

* Sep'18 +0.000 at 97.770

* Dec'18 -0.005 at 97.630

* Red pack (Mar'19-Dec'19) -0.005-0.010

* Green pack (Mar'20-Dec'20) -0.010-0.020

* Blue pack (Mar'21-Dec'21) -0.025

* Gold pack (Mar'22-Dec'22) -0.025-0.035

     US SWAPS: Spds mixed by the bell, spd curve flatter all session w/long end

spds

tighter/off midday narrows late. Rather modest flow, two-way positioning ahead

week's event risk, light swappable supply lending to front end holding wider.

Earlier, sources reported fast$ paying in belly, spd curve steepeners out the

curve from bank portfolios earlier. More recently, small ($74.9k) DV01 2s5s

flattener, rate paying 10s at 2.72349%. OTC swaption vol higher, paring gains

late. Latest spread levels:

* 2Y  +0.06/19.44

* 5Y  +0.25/7.31

* 10Y -0.38/1.94

* 30Y -0.88/-14.75

     PIPELINE: $700M KBN 3Y priced

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

01/30 $700M *Kommunalbanken (KBN), 3Y FRN 3ML +4

01/30 $500M Nederlandse Waterschapsbank (NWB), 18M FRN 3ML+2 Wednesday

01/30 Chatter, 3M (MMM) A1/AA-

01/30 Chatter, Bank of New Zealand (BZLNZ) A1/AA-

01/30 Chatter, KeyBank 

01/30 Chatter, Fifth Third Bank (FITB) A3/A

01/30 Chatter, State Street Corp (STT) A1/A

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

- Jan 31 26-Jan MBA Mortgage Applications (4.5%, --) 0700ET 

- Jan 31 Dec ADP private payrolls (250k, --) 0815ET 

- Jan 31 Q4 ECI (0.7%, 0.6) 0830ET 

- Jan 31 Tsy refunding annc, 0830ET 

- Jan 31 Jan ISM-Milwaukee Mfg Index (65.57, 63.9) 0900ET 

- Jan 31 Jan MNI Chicago PMI (67.8, 64.0) 0945ET 

- Jan 31 Dec NAR pending home sales index (109.5, --) 1000ET 

- Jan 31 Jan help-wanted online ratio (1.28, --) 1000ET 

- Jan 31 26-Jan crude oil stocks ex. SPR w/w (-1.07m bbl, --) 1030ET 

- Jan 31 FOMC policy announcement, in Washington, 1400ET

     Eurodollar/Treasury Option Summary

     Eurodollar options, Pit/screen: 

* -5,000 short Sep/Blue Sep 80 call spds, 0.5

* +5,000 Apr/Jun 75/77 put spd strip, 4.5

* 4,000 Dec 82/83/87 2x3x1 broken call flys, 0.0

* +25,000 Green Jun 70/73 put spds, screen, 14.0

* 7,500 Mar 80/Jun 76 put spds, 0.0

* 4,000 Feb/Mar 81 put spds, 1.0

* 25,000 Mar 81/82 strangles, 2.25 vs. 98.13/0.40%

* 10,000 Sep 75/76 put spds, 2.0 earlier

* 3,000 Dec 70/72 2x1 put spds, 0.5

* 5,000 Jun 80/82 1x3 call spds, 1.5

* 5,000 Feb/Mar 71 put spds, 1.0

* 4,000 short Dec 70/72 2x1 put spds, 0.5

* 4,000 short Jun 76/Blue Jun 75 call spds, 1.0

Decent volume by the open >275k,

* -55,000 Green Mar 71/73 put spds, 9.0

* -15,000 Green Mar 72 puts, 5.0

* -8,000 Green Mar 76 calls, 1.0

* +8,000 Green Jun 78 calls, 1.5

     Tsy options, Pit/screen:

* -10,000 TYH 120.5/121.75/123 broken put flys on 3x3x1 ratio, 13/64

* +20,000 TYH 122 puts, 34- to 39/64

* 2,000 FVJ 114.75/115.25 1x2 call spds, .5/32

* 5,000 FVH 114.25 puts, 5.5/32

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

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