US TSYS: 2Y YLD RESUMES CLIMB, MID-'08 HIGHS/MARCH HIKE LOCK

US TSYS SUMMARY: Tsys trades mixed by the close, curve back to flattening after

trimming moves into midday, two-way positioning flow on net. Decent volume

belying relative quiet week opener. Limited data, focus more on Wed's IP (0.5%

est). Bill-auctions go off without a hitch.

- Equities reverse early gains, gapped lower on 2 large program sales, gold well

off lows (XAU -0.75, 1339.31), oil weaker (WTI -0.45, 63.85). 

- Tsys trailed firmer Bund open on heavy early volume (TYH>500k by the open;

inter-dealer broker volume >130%), focus on Reuters ECB story ECB not planning

bond purchase plan changes until March.

- Bid for rates gradually evaporated from midmorning on, Tsy ylds climbed to

positive territory by midday as equities pared gains. Late second half rebound

in long end saw curves resume flattening. Large corp issuance late: $6B Wells

Fargo Bank NA (2y Fxd/FRN, 3y Fxd/FRN) and $4B JPMorgan (11NC10 +100-105, 31NC30

+115) launched 

- Heavy front end Eurodollar selling as rate hike in March gains momentum,

ongoing heavy option flow as well.

- Late ylds: 2Y 2.014%, 3Y 2.122%, 5Y 2.352%, 7Y 2.474%, 10Y 2.541%, 30Y 2.830%

US TSY FUTURES CLOSE: See-saw action on week opener, curves re-flattened late

w/10-30s rebounding as equities knocked lower on couple large sell-programs, but

also rebound. Latest curve update:

* 2s10s -2.062, 52.385 (54.361H/51.468L);

* 2s30s -3.333, 81.407 (84.870H/80.951L);

* 5s30s -2.210, 47.877 (50.699H/47.709L); 

Current futures levels:

* Mar Ultra bonds up 14/32 at 164-28 (164-06L/165-11H)

* Mar 30-yr Bond futures up 8/32 at 150-24 (150-10L/151-01H)

* Mar 10-yr futures steady at 122-30 (122-27L/123-05H)

* Mar 5-yr futures down 1.25/32 at 115-15.75 (115-13.75L/115-20H)

* Mar 2-yr futures down 1.25/32 at 106-25.75 (106-25.25L/105-27.5H)

US EURODOLLAR FUTURES CLOSE: Weaker across the strip, short end under pressure

all day while long end rebounds slightly. Current White pack (Mar'18-Dec'18):

* Mar'18 -0.020 at 98.140

* Jun'18 -0.020 at 97.950

* Sep'18 -0.020 at 97.830

* Dec'18 -0.025 at 97.715

* Red pack (Mar'19-Dec'19) -0.020

* Green pack (Mar'20-Dec'20) -0.020-0.015

* Blue pack (Mar'21-Dec'21) -0.015-0.010

* Gold pack (Mar'22-Dec'22) -0.005

US SWAPS: Spds wider across the curve by the close, long end at top end of range

as curve flips from flatter to steeper, reacting if not mirroring see-saw action

in Tsy curve. Deal-tied paying added to move in second half as $6B Wells Fargo

Bank NA (2y Fxd/FRN, 3y Fxd/FRN) and $4B JPMorgan (11NC10 +100-105, 31NC30 +115)

launched. Payers across the curve, 2-way fly action: $300k 2Y-4Y-10Y Fly, paying

the belly, receiving in the belly of a 8Y-9Y-10Y fly and paying in the belly of

a 3Y-4Y-5Y fly. OTC and exchange traded option vol receded on the day. Latest

spread levels:

* 2Y  +0.75/20.00

* 5Y  +1.12/5.62

* 10Y +0.62/+0.38

* 30Y +1.50/-17.94

PIPELINE: *** Wells Fargo launch $6B in 4-tranches, JPM $4B in 2-tranches

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

01/16 $6B #Wells Fargo Bank NA $Benchmark 2y Fxd/FRN, 3y Fxd/FRN

01/16 $4B #JPMorgan 11NC10 +100-105, 31NC30 +115 Area

01/16 $1B ANZ New Zealand 3Y fxd +65a, 10Y +95

01/16 $600M #Aercap 5Y +100

01/16 $550M #Aercap 10Y +137

01/16 $1.4B Meredith Corp 8nc3 Sr notes

01/16 $1B Kommuninvest (KOMINS) Aaa/AAA no grow, 144a/Reg-S 5Y

01/16 $1B Hologic $1B Split Between New 10NC5, 4.375% 2025 Tap

01/16 $500M Olin Corp 12NC6 Sr notes, 5-5.25%

01/16 $Benchmark Export Development Canada (EDC) 5Y Global IPT MS+11a

01/16 $Benchmark Dexia Credit Local 3Y, price Wednesday?

01/16 Chatter Wal Mart issuance,

01/16 Chatter Petroleos Mexicanos (PEMEX) Baa3/BBB+, rumored $7.5B

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

- Jan 17 12-Jan MBA Mortgage Applications (8.3%, --) 0700ET

- Jan 17 Jan NY Fed Business Leaders Index (16.7, --) 0830ET

- Jan 17 13-Jan Redbook retail sales m/m (0.1%, --) 0855ET

- Jan 17 Dec industrial production MoM (0.2%, 0.5%) 0915ET

- Jan 17 Dec capacity utilization (77.1%, 77.3%) 0915ET

- Jan 17 US Senate Bank Comm vote Powell's Fed chair nom'n, 1000ET

- Jan 17 US Senate Bank Comm vote Quarles' Fed Brd Gov/14Y term, 1000ET

- Jan 17 Jan NAHB home builder index (74, --) 1000ET

- Jan 17 Fed Beige Book 1400ET

- Jan 17 Chi Fed pres Evans/Dallas Fed pres Kaplan participation "American

Council of Life Insurers Exec Roundtable", Florida, audience/media Q&A, 1500ET

- Jan 17 Nov net TICS flows 1600ET

- Jan 17 Nov long term TICS flows 1600ET

- Jan 17 Cleveland Fed pres Mester on MonPol communication at "Tangri Lecture at

Rutgers University" New Jersey, audience/media Q&A, 1630ET

Eurodollar/Treasury Option Summary

Eurodollar options, Pit/screen:

* 20,000 short Dec 70 puts, 4.0

* total 16,000 Red Dec'19 66/68/71 put trees, 2.5

* total +20,000 Dec 72/73/75 1x3x2 put flys

* +20,000 Jun 76/77/78 put flys, 2.0

* 10,000 Dec 72/73/75 1x3x2 put flys

* +5,000 Mar 78 calls, 0.5

* +10,000 long Green Sep 85 calls, 2.5 vs. 97.585

* 6,000 long Red Dec 66/68/71 put trees, 2.5

* 2,500 short Feb short Feb 76/77/78 1x4x2 call flys, 4.0 net/wings over

* +10,000 Jun 82/83 call spds 0.5 vs. 97.975/0.05% w/

* +10,000 short Mar 78/81 call spds, 1.0 vs. 97.675/0.10%

* update, total 20,000 short Mar 81 calls, 0.5

* -30,000 Mar 82 puts, 12.0 vs. 87 calls, cab (-50k at 10.5 on Fri vs. cab call)

* 5,000 Mar 81/82 put spds, 10.0

* 1,750 Dec 73/75/76/77 put condors, 3.5

* 3,500 Jun 76/77/78 put flys, 1.75

* 5,000 short Mar 81 calls, 0.5

* +5,000 Mar 81/82 put spds, 1.0

* 3,500 Apr/Jun 78 put spds, 1.25

* 2,000 Blue Feb 73/75 strangles, 7.0

* 2,000 Jun 82/85 call spds, 0.5

* 74,000 Green Feb 75/76 2x1 put spds, checking price

* 6,000 Green Mar 75 puts

* 5,500 Dec/short Dec 68/73 2x1 put spd spds

* 24,800 Mar 82 puts

* 14,000 Mar 81 puts

* 10,000 Mar 83 puts

Block recap --

* 5,000 short Mar 78/81 call spds, 0.5 vs.

* 5,000 short Mar 75/76 1.5x1 put spds, 2.75

Late Monday Blocks

* 20,000 short Mar 75/76 1.5x1 put spds, 3.0 vs.

* 20,000 short Mar 78 calls, 1.0

Tsy options, Pit/screen:

Synthetic FIB, duration weighted 5s30s flattener

* -3,400 FVH 115.75 calls, 11/64 vs.

* +850 USH 152 calls, 46/64

* 9,885 wk1 FV 115.5 puts vs. 6,590 FVG 115.5 puts, 11.5/64 vs. 115-17.25

* 2,800 TYH 126 calls, 2/64 vs. 122-29

* 5,000 wk1 FV 115.5 puts, 13/64 vs. 115-17.25/0.48%

* 2,500 TYH 124.5/126 call spds, 5/64 vs.

* 2,500 TYJ 125/126.5 call spds, 4/64

* 1,300 TYJ 120.5 puts, 9/64 vs. 122-20.5

* 1,700 wk1 FV/FVG 115.5 put spd, 4/64 vs. 115-20.5

* -17,000+ TYH 122.5 puts, 20- to 19/64 mostly screen

* 4,000 TYH 126 calls, 2/64

* 2,000 TYG 122.5/123.5 put spds, 36/64

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

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