US TSYS: ANOTHER STRONG TSY AUCTION IN THIN HOLIDAY TRADE

US TSY SUMMARY: Similar to Tue's price action after strong 5Y auction, Tsys

gained as 7Y trades through (awarded 1.835% rate vs. 1.842% WI; 2.47 bid/cover

vs. 2.44 prior) but prop/fast$ sales saw lvls retraced appr a third of the move.

Previous $32B 7Y awarded 1.719%; 2.47 bid/cover vs. 2.44 prior. Indirects drew

59.42% vs. 69.63% prior, directs 23.43% vs. 10.05%, dealers 17.15% vs. 20.31%.

- Delayed reaction on thin volume, Tsy futures extended session highs a few

minutes after the auction on only an additional 10k in TYH for example. Yld

curves bent flatter on narrow range while volume trade remained extremely light

w/TYH<325k by the bell.

- Eurodollar futures traded marginally higher on exceptionally thin holiday

volumes. No USD LIBOR sets or European sets for that matter due to Boxing Day

holiday, LIBOR fixes resume Friday.  Swap spds narrowed amid better rate

receivers in 2s and 5s on net, 10Y spd held narrow range w/mild payers in 9s

(1.8275%) and 10s (1.8615%) in the second half. No deal-tied hedging.

- The 2-Yr yield is up 1bps at 1.631%, 5-Yr is up 1.3bps at 1.7222%, 10-Yr is up

0.2bps at 1.9014%, and 30-Yr is up 0.4bps at 2.3327%.

TECHNICALS

US 10YR FUTURE TECHS: (H0) Focus Is On Key Support

*RES 4: 130-04+ High Dec 3

*RES 3: 129-14   High Dec 12 and near-term bull trigger

*RES 2: 129-02   High Dec 13

*RES 1: 128-23+ High Dec 17

*PRICE: 128-03  @ 13:21 GMT, Dec 26

*SUP 1: 127-29   Low Dec 13 and bear trigger

*SUP 2: 127-18+ 1.618 projection of the Oct 3 to Nov 7 low from Dec 3 high

*SUP 3: 127-00   Round number support

*SUP 4: 126-31+ 1.764 projection of the Oct 3 to Nov 7 low from Dec 3 high

10yr futures are consolidating for now. The outlook though remains bearish with

attention on the 127-29 key support. A breach would confirm a resumption of the

broader downtrend and maintain the bearish price sequence of lower lows and

lower highs. This would open 127-18+, a Fibonacci projection and, the 127-00

level. On the upside, initial resistance is seen at 128-23+ however, a break

above 129-14, Dec 12 high is needed to reverse the outlook.

     AUSSIE 3-YR TECHS: (H0) Vulnerability Resumes

*RES 4: 99.400 - Low Nov 29

*RES 3: 99.360 - High Dec 12

*RES 2: 99.335 - High Dec 13 

*RES 1: 99.300 - High Dec 17

*PRICE: 99.120 @ 13:23 GMT Dec 26

*SUP 1: 99.120 - Low Dec 23

*SUP 3: 99.083 - 200-dma 

*SUP 4: 99.070 - Low Nov 8

*SUP 4: 99.000 - Handle Support

After a poor week, Tuesday's session also did little to instill confidence in

bulls, ekeing to a new low of 99.120. The slip through 99.200 last week is

significant and prefaced a show below 99.162. This opens the 99.083 200-dma and

the Nov 8 low beyond. On the upside, resistance is at 99.335, Dec 13 high. 

     AUSSIE 10-YR TECHS: (H0) Remains Weak

*RES 3: 98.9500 - High Dec 5

*RES 2: 98.8950 - High Dec 10 and 11

*RES 1: 98.8850 - High Dec 5

*PRICE: 98.6700 @ 13:25 GMT, Dec 26

*SUP 1: 98.6550 - Low Dec 20 

*SUP 2: 98.6500 - Low Nov 8/11

*SUP 3: 98.5785 - 3.0% Lower Bollinger Band

Aussie 10yr futures weakened further for a particularly negative close Friday,

edging below the 200-dma for the first time in over a year. This switches the

picture to outright bearish and opens further losses down to levels not seen

since mid-July. The RSI is also yet to indicate oversold conditions, meaning the

run lower could still have legs. For bulls to slow any decline they first need

to recoup the 200-dma before eyeing the Dec 5 at 98.8850. 

     JGB TECHS: (H0): Outright Bearish

*RES 3: 153.55 - High Nov 28 and key resistance

*RES 2: 153.11 - High Dec 4

*RES 1: 152.50 - High Dec 9

*PRICE: 151.83 @ 13:35 GMT, Dec 26

*SUP 1: 151.62 - Contract lows, Dec 20

*SUP 2: 151.11 - 76.4% August 2018 - September 2019 Rally

*SUP 3: 150.61 - 1.0% lower 10-dma envelope

The outlook for JGB futures flipped to outright bearish Friday as losses

persisted into the close. This opens renewed pressure south of the 151.00 handle

to levels not seen since December last year. A clear downtrend remains in  place

though with a price sequence of lower lows and lower highs evident. The trigger

for a fresh round of weakness turns to the 151.11 Fib retracement. A break here

would open the 1.0% lower 10-dma envelope at 150.61. 

MONTH-END EXTENSIONS: Preliminary Bloomberg-Barclays US month-end index

extension/forecast summary compared to the average increase for the past year

and the same time in 2018; TIPS -0.02Y; Govt inflation-linked, -0.03.

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

*US Tsys.................0.06........0.08........0.06

*Agencies................0.08........0.10........0.05

*Credit..................0.06........0.09........0.06

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

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

*Aggregate...............0.07........0.08........0.05

*Long Govt/Credit........0.07........0.09........0.07

*Interm Credit...........0.05........0.08........0.06

*Interm Govt.............0.07........0.08........0.06

*Interm Govt/Cred........0.06........0.08........0.06

*High Yield..............0.11........0.08........0.04

TSY FUTURES CLOSE: Mildly bid across the board on very light volume, off post 7Y

auction highs by the close. Yld curves mixed. Update:

* 3M10Y  +0.618, 32.634 (L: 30.314 / H: 33.511)

* 2Y10Y  -0.642, 26.821 (L: 26.319 / H: 28.165)

* 2Y30Y  -0.272, 70.132 (L: 69.316 / H: 71.347)

* 5Y30Y  +0.651, 61.012 (L: 59.813 / H: 61.104)

Current futures levels:

* Mar 2-Yr futures down 0.125/32  at 107-20.25 (L: 107-19.25 / H: 107-21.12)

* Mar 5-Yr futures up 0.75/32  at 118-13.75 (L: 118-10.75 / H: 118-15.25)

* Mar 10-Yr futures up 2/32  at 128-12 (L: 128-06.5 / H: 128-14.5)

* Mar 30-Yr futures up 3/32  at 156-15 (L: 156-06 / H: 156-21)

* Mar Ultra futures up 1/32  at 183-1 (L: 182-19 / H: 183-11)

US EURODLR FUTURES CLOSE: Mildly bid across the strip by the bell, upper half

narrow range on light holiday volume. Current White pack (Mar 20-Dec 20):

* Mar 20 +0.005 at 98.230

* Jun 20 steady at 98.285

* Sep 20 steady at 98.340

* Dec 20 +0.005 at 98.355

* Red Pack (Mar 21-Dec 21) +0.005

* Green Pack (Mar 22-Dec 22) +0.010

* Blue Pack (Mar 23-Dec 23) +0.010

* Gold Pack (Mar 24-Dec 24) +0.005 to +0.010

US DOLLAR LIBOR: No settles, rate fixes resume Friday.

US SWAPS: Spds tighter all day, short end extends move late amid better rate

receivers in 2s and 5s on net, 10Y spd held narrow range w/mild payers in 9s

(1.8275%) and 10s (1.8615%) in the second half. No deal-tied hedging. Latest spd

levels:

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

Thu 1500    -0.94/+8.06    -0.62/-0.12   -0.25/-4.25    -0.62/-29.62

1345        -0.25/+8.75    -0.50/+0.00   -0.25/-4.25    -0.62/-29.62

1200        -0.88/+8.12    -0.69/-0.19   -0.25/-4.25    -0.25/-29.25

1030        -0.81/+8.19    -0.62/-0.12   -0.25/-4.25    -0.25/-29.25

Thu Open    -0.62/+8.38    -0.38/+0.12   -0.25/-4.25    +0.00/-29.00

Thu 0715    -0.69/+8.31    -0.38/+0.12   +0.00/-4.00    +0.25/-28.75

Tue 1045    +0.12/+7.38    +0.62/+0.50   +0.38/-4.00    +0.25/-29.00

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

* Daily Effective Fed Funds Rate: 1.55%, volume: $71B

* Daily Overnight Bank Funding Rate: 1.54%, volume: $195B

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

* Secured Overnight Financing Rate (SOFR): 1.52%, $1,006B

* Broad General Collateral Rate (BGCR): 1.50%, $368B

* Tri-Party General Collateral Rate (TGCR): 1.50%, $345B

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

27-Dec 1030 20-Dec natural gas stocks w/w

27-Dec 1100 20-Dec crude oil stocks ex. SPR w/w

27-Dec 1100 Q4 St. Louis Fed Real GDP Nowcast

27-Dec 1115 Q4 NY Fed GDP Nowcast

27-Dec 1500 Nov farm prices

PIPELINE: High grade issuance limited for month at $21.07B

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

12/23-12-27 No new issuance expected for shortened week

-

12/16-12/20 No new US$ issuance last Monday-Friday; $21.07B/month

Eurodollar/Tsy options 

Eurodollar options:

* -2,500 Jun 82 straddles, 13.0

* -3,000 Jun/Sep 81 put strips, 3.5

* -1,500 Blue Jan 82 straddles, 12.5

* +5,000 Sep 90/92 3x4 call spds vs. -2,500 Jun 82 puts, 0.5 net/package

Tsy options:

* Update, total +22,500 FVG 118.5 calls, 18.5/64 vs. 118-13.5/0.46%

* 2,000 TUH 106.87 puts, .5/64 on screen

* FVF 118.25/118.5/118.75 put trees trade 12.5/64

* -1,500 TYG 128.5 straddles, 1-10/64

* -5,400 TYG 127 puts, 9/64 on screen

Limited overnight trade includes

* 6,750 TYH 130 calls, 18/64

* 11,750 TYG 127.5 puts, 16- to 15/64

* 4,000 TYG 125.5 puts, 3/64

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

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