US TSYS: BOND REVERSES ON US$ BOUNCE, FED EVANS STRONG GRWTH

US TSYS SUMMARY: Flattener tone evaporated late as US$ index (DXY) rebounded

+.246, 90.637, choppy long end support disappeared. Gold reversed (XAU -10.32,

1328.10); while equities made new all-time highs: Indu +329 and change to 26122,

emini +23.25, 2805.75; West Texas crude rebounded (WTI +0.18, 63.91) more on

back of cold weather affecting Texas crude ports.

- Tsy curves rebounded, earlier curve Block 10s30s ultras Blocked: +5,455 UXH,

131-31, buy through -29 offer at time of post vs. -2,539 WNH, 164-31. 10Y yld

+.0203 at 2.5573, 2Y yld +.0207, 2.0349% last seen mid-Sep' 2008.

- Ongoing high-grade corp supply -- largest issuance from banks ($3B Citi, $2.5B

Westbank, waiting on DB) generated hedging flow. Supply weighing on front end

spds. Little react to data, US Gov shutdown midnight Fri, Fed blackout Saturday 

- Decent option volume, some profit taking in puts, decent low delta adds

targeting Jun rate hikes, position roll-downs and upside call buying in the mix.

- Heavy front end selling Eurodollar futures as rate hike probability for March

and June on the rise (97% and 68% respectively).

- Late ylds: 2Y 2.039%, 3Y 2.157%, 5Y 2.391%, 7Y 2.511%, 10Y 2.572%, 30Y 2.845%

US TSY FUTURES CLOSE: Lower across the board but off session lows after long end

bid disappeared when US$ rebounded late. Late Chicago Fed pres Evans comments at

event in Florida expects strong growth, positive knock-on effect of tax break --

read: more hikes, continued flatter curve but inversion unlikely. Noted earlier,

rate hike probability for March and June on the rise (97% and 68% respectively).

Curves rebounded off lows: 

* 2s10s +1.008, 52.887 (53.623H/50.405L);

* 2s30s -0.515, 80.200 (81.771H/77.169L);

* 5s30s -1.844, 45.359 (47.552H/43.773L); 

Current futures levels:

* Mar Ultra bonds down 12/32 at 164-17 (164-08L/165-21H)

* Mar 30-yr Bond futures down 14/32 at 150-12 (150-06L/151-06H)

* Mar 10-yr futures down 9.5/32 at 122-22 (122-20L/123-02H)

* Mar 5-yr futures down 5.25/32 at 115-10.75 (115-09.5L/115-17.5H)

* Mar 2-yr futures down 1.75/32 at 106-24.5 (106-24.25L/105-26.25H)

US EURODOLLAR FUTURES CLOSE: Weaker across the strip, near late session lows,

heavy volume. Current White pack (Mar'18-Dec'18):

* Mar'18 -0.005 at 98.135

* Jun'18 -0.015 at 97.935

* Sep'18 -0.025 at 97.805

* Dec'18 -0.030 at 97.690

* Red pack (Mar'19-Dec'19) -0.030-0.035

* Green pack (Mar'20-Dec'20) -0.035

* Blue pack (Mar'21-Dec'21) -0.035-0.040

* Gold pack (Mar'22-Dec'22) -0.040-0.035

US SWAPS: Spds running mixed by the bell, spd curve steeper all day, decent

two-way in front end tied to deal-tied hedging between 2s-5s, keeping lid on

widening out the curve. Earlier reports of decent real$ receiving in 30s (rate

and spd). Other flow includes $20m payer 3Y at 2.33468%, 5yr switch around

2.42895-2.4310, $93.9k DV01 3Y-5Y FLATTENER, $61.2k DV01 5Y-6Y STEEPENER,

$122.4k 2Y-5Y-6Y Fly, receiving the belly. OTC and exchange traded option vol

lower/off lows when underlying rates traded lower in the long end as US$

rebounded off lows. Decent volume trade on mixed flows, large buyer 40k TYH 124

calls at 8/64. Latest spread levels:

* 2Y  -0.12/20.00

* 5Y  -0.31/5.31

* 10Y +0.19/+0.62

* 30Y +1.00/-16.75

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

01/17 $2.5B #Westpac Banking Group (WSTP) 3-part: 3Y, 3T FRN, 10Y

01/17 $3B #Citigroup Inc 2-tranche issue:

01/17 $2B #Citigroup 5NC4 Fxd-FRN +75 and $1B 21NC20 Fxd-FRN +102

01/17 $2.15B #Deutsche Bank NY 3Y $1.15B 3Y Fxd +100, $650M 3Y FRN 3mL+81.5

01/17 $2B #PNC Bank 2 part: 3Y fix/FRN +55, 10Y +85

01/17 $1.5B *Dexia Credit Local (DEXGRP) Aa3/AA, 144a/Reg-S 3Y, MS +27

01/17 $1B *Kommuninvest (KOMINS) Aaa/AAA 144a/Reg-S 5Y, MS +4

01/17 $1.25B *Export Development Canada (EDC) Aaa/AAA, Global 5Y MS+10

01/17 $500M #Noble Corp Sr notes 2026

01/17 $Benchmark IFC 3Y Global, MS+1

01/17 $300M Toll Brothers 10Y

01/17 Chatter International Finance Corp (IFC) Aaa/AAA 3Y

01/17 Chatter Export-Import Bank of India (EXIMBK) Baa2/BBB-

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

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

- Jan 18 13-Jan jobless claims (261k, 250k) 0830ET

- Jan 18 Dec housing starts (1.297m, 1.275M) 0830ET

- Jan 18 Dec building permits (1.303m, 1.283m) 0830ET

- Jan 18 Jan Philadelphia Fed Mfg Index (27.9, 25.0) 0830ET

- Jan 18 14-Jan Bloomberg comfort index 0945ET

- Jan 18 12-Jan natural gas stocks w/w (-359Bcf, --) 1030ET

- Jan 18 Tsy annc next weeks 2Y FRN, 2- 5- and 7Y note auction size, 1100ET

- Jan 18 12-Jan crude oil stocks ex. SPR w/w (-4.95m bbl, --) 1100ET

- Jan 18 $13B 10Y TIPS new issue auction 1300ET

- Jan 18 17-Jan Fed weekly securities holdings 1630ET

- Jan 18 Clev Fed Mester on mon/pol at Cncl Economic Education's Economists on

the Economy, NY Q$A, 1805ET

Eurodollar/Treasury Option Summary

Eurodollar options, Pit/screen:

* +10,000 short Mar 72/73/75 put flys, 2.5

* +7,000 Red Sep19 71/73 put spds, 8.0

* +3,000 short Apr 75/76 3x2 put spds, 7.5 vs. 97.60/0.10%

* -15,000 short Mar 76/78 put spds, 19.0

* +5,000 Dec 72/73 3x1put spds, 0.0/1-leg over

* +3,000 Jun 80/81 call spds even vs. Green Jun78 calls

* +6,000 Red Dec19 66/68/71 put trees, 3.0

* -10,000 Jun 83/86 call spds, cab

* +10,000 Jun 81 calls even vs. Green Jun 80 calls

* Update, total +40,000 short Jun/Green Jun 78 call spd, 0.5 net debit

conditional curve steepener vs. 98.58 to -.585

* Update, total +35,000 Jun 76/77 put spds, cab 

* +25,000 short Jun/Green Jun 78 call spd, 0.5 net debit curve steepener

* +10,000 Green Jun 70/71/72 put flys, 1.5

* 2,500 short Jun 72/73/76 put flys screen

* -10,000 Jun 78/80 put spds, 7.0 vs. 97.955/0.10%

* 5,750 Red Mar 73/76 2x1 put spds, 4.5

* +5,000 Blue Feb 75/76 call spds, 2.0 vs. 97.41/0.15%

* +2,500 short Mar 75/76 3x2 put spds, 7.0

* +2,500 short Feb 76/77/78 1x4x2 put flys, 0.5 net/wings over

* +2,500 Jul/Sep 75/76/77 put fly strip, 6.0

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

* 10,000 Blue Jun 76/78 call spds, screen

* 20,000 Jun 77/78 put spds vs. Apr 80/81 call spds

* another 18,000 Jun 78 puts, 2.75 8k vs.

* 4,000 Blue Jun 70/72 put spds

* Block +5,000 short Dec 70 puts, 4.5 vs. 97.47/0.10 at 0702ET

Block recap, Latest at 0649:41ET

* 6,000 Jun 80/81 call spds, 3.0 w/short Jun 77/78 call spd, 2.5, yesterday a

dealer bought the EDM 82/83 call spd w/EOH 78/81 call spd strip for 1.5

Earlier Blocks, from 0504-0544ET, adds to 10k Block on Tue

* total 15,000 short Mar 75/76 3x2 put spds, 7.0 vs.

* total 30,000 short Mar 78 calls, 1.0

Block post at 0423ET

* 5,000 Dec 85 calls, 0.5

Block post at 0209ET

* 15,000 short Mar 78 calls, 1.0

Tsy options, Pit/screen:

* +40,000 TYH 124 calls, 8

* +5,000 TYG 122/122.5 put spds, 6/64

* +1,800 TYJ 122.5 puts 9/64 over the TYH 123 puts

* 2,000 TYK 121/124 put spds, 42- to 43/64

* 1,500 FVG 115.25/115.5 strangles, 10.5/64

* -2,000 TYH 123 straddles, 1-3/64 vs. 122-28

* +4,000 TYH 126 calls, 2/64 vs. 123-00

* 1,350 USG 147/155 put over risk reversals, 1/64 vs. 150-18

* -1,300 TYH 122.5/123.5 strangles, 41/64

* 1,000 TYG/TYH 123 put spds, 16/64

Block, 0834:50ET

* 14,655 TYH 122.5 puts, 25/64 vs.

* 14,655 TYG 123 puts, 23/64

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

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