US TSYS: CLOSING OUT 2019, HOPING FOR BETTER 2020

US TSY SUMMARY: Tsy futures weaker/off lows on final session for 2019; extending

past overnight lows, large Feb 10Y call spd sale hedges contributed to the

downdraft amid thin holiday markets; Extend lows yet again after consumer

confidence data (126.5 DEC V NOV 126.8).

- Yield curves continue to march steeper as recession concerns evaporate into

year end. Current levels near early 2018 levels (2s30s) to late fall of 2018

(2s10s).

- Tsy futures have bounced off lows around midmorning, sources reporting misc

acct buying in 2s and 5s, while leveraged$ selling noted in 2s and 30s after

better selling in 10s from option accts on heavy screen trade trade TYG call

spds.

- Swap spds: short end pulled spds wider, 7-month highs as 2Y spd climbs from

near inversion on Dec 10 to nearly +12.0 currently, largest 1-month move since

March 2018. Near mid-June highs, the 30Y spd still remains inverted.

- The 2-Yr yield is down 0.2bps at 1.5631%, 5-Yr is up 1.6bps at 1.6861%, 10-Yr

is up 3.7bps at 1.9157%, and 30-Yr is up 5bps at 2.3793%. 

MONTH-END EXTENSIONS: UPDATED 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.................0.07........0.08........0.06

*Agencies................0.09........0.10........0.05

*Credit..................0.07........0.09........0.06

*Govt/Credit.............0.07........0.08........0.06

*MBS.....................0.09........0.07........0.05

*Aggregate...............0.06........0.08........0.05

*Long Govt/Credit........0.06........0.09........0.07

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

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

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

*High Yield..............0.09........0.08........0.04

TSY FUTURES CLOSE: Much like Monday, Tsy futures are weaker by the early close,

off midmorning lows after trading sideways overnight. Reminder, early pit close

today: 1300ET; GLOBEX 1600ET close/reopen 1600ET Wednesday. Yield curves

continue to march steeper as recession concerns evaporate into year end. Current

levels near early 2018 levels (2s30s) to late fall of 2018 (2s10s). Update:

* 3M10Y  +2.974, 36.266 (L: 30.57 / H: 36.906)

* 2Y10Y  +3.735, 34.489 (L: 29.482 / H: 34.524)

* 2Y30Y  +5.542, 81.394 (L: 74.234 / H: 81.394)

* 5Y30Y  +3.954, 69.615 (L: 64.742 / H: 69.689); Current futures levels:

* Mar 2-Yr futures up 0.125/32  at 107-23.375 (L: 107-22.12 / H: 107-23.75)

* Mar 5-Yr futures down 1.5/32  at 118-18.75 (L: 118-16 / H: 118-21.25)

* Mar 10-Yr futures down 5/32  at 128-12 (L: 128-08 / H: 128-19.5)

* Mar 30-Yr futures down 18/32  at 155-22 (L: 155-13 / H: 156-16)

* Mar Ultra futures down 43/32  at 181-15 (L: 181-09 / H: 183-08)

US EURODLR FUTURES CLOSE: Modestly weaker for the most part, near low end narrow

range, lead quarterly EDH0 outperforming on the shortened session. Current White

pack (Mar'20-Dec'20):

* Mar 20 +0.005 at 98.265

* Jun 20 -0.005 at 98.310

* Sep 20 -0.005 at 98.365

* Dec 20 -0.010 at 98.375

* Red Pack (Mar 21-Dec 21) -0.01 to -0.005

* Green Pack (Mar 22-Dec 22) -0.02 to -0.015

* Blue Pack (Mar 23-Dec 23) -0.025 to -0.02

* Gold Pack (Mar 24-Dec 24) -0.035 to -0.025

US DOLLAR LIBOR: Latest settles

* O/N +0.0082 at 1.5426% (+0.0064/week)

* 1 Month -0.0184 to 1.7625% (-0.0369/wk)

* 3 Month -0.0010 to 1.9084% (-0.0362/wk)

* 6 Month +0.0034 to 1.9121% (-0.0086/wk)

* 1 Year -0.0048 to 1.9963% (-0.0080/wk)

US SWAPS: Short end pulling spds running wider across the board, 7 month highs

in the short end as 2Y spd climbs from near inversion on December 10 to nearly

+12.0 currently, largest 1-month move since March 2018. Near mid-June highs, the

30Y spd still remains inverted. Limited flow includes 1Y receiver at 1.777%,

payer unwinds in 2s around 1.6761%-1.6960%, payers in 5s-10s and 2s4s5s payer

fly. Current spd levels:

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

1130        +0.90/+11.75   +0.62/+3.25   +0.38/-2.88    +0.12/-29.38

1030        +0.88/+11.72   +0.50/+3.12   +0.31/-2.94    +0.00/-29.50

Tue Open    +0.84/+11.69   +0.38/+3.00   +0.25/-3.00    +0.00/-29.50

Mon 1500    +0.94/+10.94   +1.00/+2.50   +0.56/-3.19    -0.50/-29.50 

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

* Daily Effective Fed Funds Rate: 1.55%, volume: $72B

* Daily Overnight Bank Funding Rate: 1.54%, volume: $196B

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

* Secured Overnight Financing Rate (SOFR): 1.54%, $1.036T

* Broad General Collateral Rate (BGCR): 1.51%, $348B

* Tri-Party General Collateral Rate (TGCR): 1.51%, $326B

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

02-Jan 0830 28-Dec jobless claims (222k, 220k)

02-Jan 0945 Dec Markit Mfg Index (final) (52.5, 52.5)

02-Jan 1130 TBA 4W Bill auction

02-Jan 1130 TBA 8W Bill auction

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

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

12/30-01/03 No new issuance expected for shortened week

-

Recapping total high-grade corporate, supra-sovereign issuance for the year:

$1.156 trillion!

* Dec $21.07B

* Nov $114B

* Oct $101B

* Sep $171.45B lead with $7B Apple, $7B Disney and $5B PayPal multi-tranche

issues

* Aug $88.725

* Jul $105.89

* Jun $41.9B

* May $106.35

* Apr $71.5

* Mar $116.52B

* Feb $104.25B

* Jan $114.25B

Eurodollar/Tsy options 

Eurodollar options:

* +5,000 short Mar 90/95 call spds, 1.0

* +5,000 Jun 82/83/85 call flys, 1.75

* 14,000 Jun 87/90 call spds, 0.75 screen/pit

* 5,000 short Apr 83/85/86 call flys

* +24,000 short Feb 88/93 call spds, 1.0 pit/screen

* >+12,500 Jan 83 calls, cab

Screen trade coming into the session included

* +5,000 Jun 81/82/83 put flys, 6.0

* +2,000 Mar 87 straddles, 7.5

Tsy options:

* +9,600 FVG/FVH 119 call spds, 9/64 vs. 118-22/0.05%

* >-50,000 TYG 129/130 call spds, 13/64

* -50,000 TYG 129.5/130 call spds, 5/64

* -50,000 TYG 129/129.5 call spds, 9/64

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

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