US TSYS: ANGST GROWS, STIR MKT ANTICIPATES SEVERAL RATE CUTS

US TSY SUMMARY: COVID-19 pandemic angst continued to generate risk-off bid for

Tsys, Yld curves bull steepening, w/ 3M10Y MORE THAN 50% off inverted lows just

prior to the LIBOR set: implication, mkt pricing in more aggressive rate cuts

from Fed are cooling recession fears slightly. Chatter over emergency rate cut

from the Fed getting louder.

- Eurodlr Whites (EDH0-EDZ0) pricing in just over 3 25 bps cuts by yr end while

chances of 50bp cut increase: Mar 18 chances of 25bp cut fully priced while

chance of 50bp now 27%; Apr 29 fully pricing in a 25bps cut w/chances of a 50bps

cut at 75.5% vs. 34.5% on Thu. Third 25bp cut fully priced in for Sep 16 through

Dec 16 meetings with chances of 50bp cut in the final three meetings of 2020

running at 22.8% for Sep, 35.5% for Nov and 59.5% for Dec.

- Waves of early selling into strength from US prop and real$ accts, while some

chunky moth-end selling reported late. Other flow includes fast- and real$

buying intermediates, bank portfolio buying 30s, steepeners in 2s and 5s vs.

10s. Negative convexity crowd eying 1.650% 30YY as next trigger to buy,

currently 1.678%.

- The 2-Yr yield is down 20.6bps at 0.8558%, 5-Yr is down 17.6bps at 0.8926%,

10-Yr is down 14.2bps at 1.1192%, and 30-Yr is down 11.8bps at 1.6397%.

TECHNICALS:

US 10YR FUTURE TECHS: (M0) Needle Still Points North

*RES 4: 134-21  1.618 projection of Jan 9 - Feb 3 rally from Feb 6 low

*RES 3: 135-08+1.50 projection of Jan 9 - Feb 3 rally from Feb 6 low

*RES 2: 134-27+1.382 projection of Jan 9 - Feb 3 rally from Feb 6 low

*RES 1: 134-22+   Intraday high  

*PRICE: 134-21+ @ 16:26 GMT, Feb 28

*SUP 1: 132-22+ Low Feb 26  

*SUP 2: 131-29   High Feb 3 and former breakout level

*SUP 3: 130-30   Low Feb 19 and 20

*SUP 4: 130-19+ Low Feb 12 

The uptrend in Treasuries remains intact, with a fresh high print once again

today at 134-22+. This week's rally resulted in a break of the Feb 3 high of

131-29, confirming a resumption of the current bull trend. Resistance at 132-02+

has also been cleared reinforcing underlying conditions. MA studies remain in a

bull mode too although it is worth noting that the trend remains overbought.

Support is at 133-00+, scope is for a climb to 134-27+ next.

AUSSIE 3-YR TECHS: (M0) Another Day, Another High 

*RES 4: 99.655 - 150% Fib projection of January rally

*RES 3: 99.608 - 138.2% Fib projection of January rally

*RES 2: 99.588 - 3% Upper Bollinger Band

*RES 1: 99.590 - High Feb 28

*PRICE: 99.575 @ 16:27 GMT Feb 28

*SUP 1: 99.200 - Low Jan 16

*SUP 2: 99.180 - Low Jan 10, 14 and 14 and near-term key support

*SUP 3: 99.085 - Low Jan 3

*SUP 4: 99.055 - Low Dec 31 and primary support

With the roll now largely complete, Aussie 3yr futures continue to spill high in

one-way traffic. New highs have now been printed at 99.590, bumping upside

targets upwards. Markets found some resistance ahead of vol band resistance at

99.593, which becomes the first hurdle ahead of new highs. Prices are likely to

moderate here as they sit in overbought conditions, with a 99.355 print needed

to moderate the bullish outlook.

AUSSIE 10-YR TECHS: (H0) Tips Higher Still

*RES 3: 99.3301 - 138.2% Fib projection of January Rally

*RES 2: 99.2988 - 3.0% Upper Bollinger Band

*RES 1: 99.2950 - High Feb 28 and Alltime High

*PRICE: 99.2550 @ 16:41 GMT, Feb 28

*SUP 1: 98.7150 - Low Jan 14 and key near-term support 

*SUP 2: 98.5900 - Low Jan 3 

*SUP 3: 98.5700 - Low Jan 2 and primary support

Aussie bonds sustained their impressive rally for another day, hitting new highs

in 10yr space at 99.2950. Upside targets now rest at vol band resistance of

99.2988 and Fib projection levels at 99.3301. To the downside, the initial focus

is on 98.7150, Jan 14 low where a break is required to signal a fresh round of

stronger bearish pressure.

JGB TECHS: (H0): Strength to Strength

*RES 3: 154.61 - 76.4% Sep - Dec 2019 Decline

*RES 2: 154.42 - 1.0% 10-dma envelope

*RES 1: 154.18 - High Feb 28

*PRICE: 154.10 @ 16:47 GMT, Feb 28

*SUP 1: 152.47 - 50-dma

*SUP 2: 151.62 - Contract lows, Dec 20

*SUP 3: 151.11 - 76.4% retracement of August 2018 - September 2019 Rally

The solid gap higher earlier in the week continues to exert influence over

prices and this bullish breakout firmed toward the end of the week. This keeps

the outlook materially bullish and upside targets shift to 154.42 and 154.61

above. A close above here would build a decent base for a challenge on the best

levels of 2019. The 200-dma switches to support at 153.50.

TSY FUTURES CLOSE: Safe haven bid for rates as virus angst spiked going into the

weekend, new all-time lows in 30YY (1.6441%) and 10YY (1.1143%). Some month end

selling at deep discount (-3,219 USM 170-01 huge gap sale through 170-16

post-time bid) failed to keep lid on late rally. Yld curves bull steepened, huge

jump in 3M10Y off inverted lows. Update:

* 3M10Y  +3.825, -14.478 (L: -28.07 / H: -10.319)

* 2Y10Y  +6.253, 25.774 (L: 18.959 / H: 27.319)

* 2Y30Y  +8.799, 77.959 (L: 68.386 / H: 79.996)

* 5Y30Y  +5.799, 74.546 (L: 68.093 / H: 75.778); Current futures levels:

* Jun 2-Yr futures up 13.75/32 at 109-6.5 (L: 108-25.75 / H: 109-07.375)

* Jun 5-Yr futures up 33/32 at 122-26.5 (L: 121-27.25 / H: 122-28.25)

* Jun 10-Yr futures up 1-15.5/32 at 134-26 (L: 133-14 / H: 134-29)

* Jun 30-Yr futures up 3-5/32 at 170-20 (L: 167-16 / H: 170-21)

* Jun Ultra futures up 5-1/32 at 208-07 (L: 203-02 / H: 208-10)

US EURODLR FUTURES CLOSE: Huge shift higher across the strip as pandemic

concerns has mkt pricing in multiple rate cuts by the Fed -- 3 25bp  by year end

w/50bp or intermeeting cut chances starting to rise. Current White pack

(Mar'20-Dec'20):

* Mar 20 +0.150 at 98.635

* Jun 20 +0.205 at 98.970

* Sep 20 +0.215 at 99.090

* Dec 20 +0.195 at 99.10

* Red Pack (Mar 21-Dec 21) +0.175 to +0.20

* Green Pack (Mar 22-Dec 22) +0.155 to +0.170

* Blue Pack (Mar 23-Dec 23) +0.120 to +0.150

* Gold Pack (Mar 24-Dec 24) +0.095 to +0.115

US DOLLAR LIBOR: Latest settles, largest declines since December 2008

* O/N -0.0062 at 1.5677% (-0.0025/week)

* 1 Month -0.0659 to 1.5152% (-0.1115/wk)

* 3 Month -0.1177 to 1.4627% (-0.2165/wk)

* 6 Month -0.1360 to 1.3972% (-0.3890/wk)

* 1 Year -0.1557 to 1.3815% (-0.3471/wk)

US SWAPS: Spds gapped wider after Friday's open, combination of risk-off and

rate paying in shorts to intermediates as safe haven bid for rates held strong

ahead weekend. Long end rebuffed move, mildly tighter all session on the back of

convexity acct receiving as 30YY slipped below 1.650%. Late spd levels:

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

Fri 1500   +2.19/+6.44    +1.88/+3.50   +1.38/-4.25    -0.00/-38.00

1200       +2.81/+7.06    +1.88/+3.50   +1.31/-4.31    -0.12/-38.12

1000       +3.00/+7.25    +1.69/+3.31   +0.44/-5.19    -0.62/-38.62

Fri Open   -0.12/+4.12    +0.06/+1.75   +0.00/-5.62    -0.62/-38.62

Thu 1500   +0.06/+4.31    +0.06/+1.62   -0.25/-5.38    -0.19/-37.31

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

* Daily Effective Fed Funds Rate: 1.58%, volume: $65B

* Daily Overnight Bank Funding Rate: 1.58%, volume: $165B

US TSYS: REPO REFERENCE RATES:

* Secured Overnight Financing Rate (SOFR): 1.58%, $1.106T

* Broad General Collateral Rate (BGCR): 1.57%, $456B

* Tri-Party General Collateral Rate (TGCR): 1.57%, $434B

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

02-Mar 0945 Feb Markit Mfg Index (final) (50.8, 50.8)

02-Mar 1000 Feb ISM Manufacturing Index (50.9, 50.5)

02-Mar 1000 Jan construction spending (-0.2%, 0.6%)

02-Mar 1130 US Tsy $45B 13W Bill (912796TX7) auction

02-Mar 1130 US Tsy $39B 26W Bill (912796XH7) auction

PIPELINE: Only $1B priced this week, virus pandemic-induced mkt risk kept

issuers sidelined after whopping $107.5B for month

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

02/27 $1B *European Investment Bank (EIB) WNG 4Y SOFR+28

Chatter for early March

02/?? $Benchmark Belarus 15Y (in addition to EUR 6- or 8Y)

Eurodollar/Tsy options 

Eurodollar options:

* Block 10,000 Mar 86 calls. 4.75 at 1304:45

* +14,000 Mar 88 calls, 1.5 vs. 98.585

* 10,000 Sep 82/85 put spds, 2.5

* Update, over +30,000 Sep 100 calls, 1.0 vs. 98.07

* Update, total 70,000 (40k in pit) Jun 86/88/92 broken call flys, 2.5-3.0

Block, 1108:00ET adding to 20k prior at 3.0

* 10,000 Jun 86/88/92 broken call flys, 2.5

Block, 1103:43ET,

* 57,000 Jul 97 calls, 2.5 vs.

* 38,000 Jul 95 calls, 6.5 Vs.

* 1,900 EDU0 99.05

Block, 1038-1039ET,

* 20,000 Jun 86/88/92 broken call flys, 3.0

* +30,000 Mar 86/88 call spds, 4.5

Block, 1123:44ET,

* 20,000 Dec 95 calls, 8.5

Block, 0828:14ET,

* 10,000 Jun 87 calls, 24.5 vs. 98.90/0.66%

Block, 0915-0919ET

* total 30,000 Mar 90/92 call spds, 1.0

Block volume crosses, 0900-0901ET

* total 20,000 May 90/91 call spds, 3.25 vs. 98.86/0.10%

Block, 0849:24,

* 12,886 short Mar 90/91 1x2 call spds, 4.5

* 12,886 Blue Mar 88/90 1x2 call spds, 3.5

* 20,000 Mar 87/88 1x2 call psds 0.0

* 13,000 Mar 85/86 2x1 put spds, 3.25

* 8,000 short Jun 85/87 call spds, 22.0

Block, 0828:14ET,

* 10,000 short Mar 90/91 2x1 put spds, 1.0 net

Block, 0821:58ET,

* 20,000 Red Jun 93/96 1x2 call spds, 1.5

Block, 0754:31ET,

* +25,000 short Dec 100 calls, 2.5

Tsy options:

Block, 1222:54ET,

* 12,260 USK 166 calls, 5-46/64 vs.

* 8,705 USM 170-06

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

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