US TSYS: CONTINUED DISCOUNT VIRUS SPREAD, NO THERAPEUTICS YET

US TSY SUMMARY: Mkts continued to discount global risk tied to spread of novel

coronavirus: strong risk on again with Tsys selling off for second day (10YY

1.6526 +.0534; 30YY 2.1371% +.0602), equities nearly back to January all-time

highs (eminis 3335.0 +35.5)

- Rates opened weaker but off lows after headlines re: WHO spokesperson said no

breakthrough treatment for novel coronavirus as yet -- at odds with earlier

China media reports discovery of "effective drug" to treat virus hit wires

around 0320ET, spurring sharp risk-on move. 30YY currently 2.0952% +0.184 vs.

2.0491% low.

- Extended lows prior to ADP and continues to slide after much better than

expected gain of 291k. Est's for Fri's NFP gained slightly to +163k from +160k. 

- Sources reported 2s10s steepener interest, selling bill, cash 10s earlier,

fast/real$ sellers intermediates, prop and swap acct buying lows. Two-way

deal-tied flow as corp issuance continued apace.

- The 2-Yr yield is up 3.2bps at 1.4411%, 5-Yr is up 4.1bps at 1.4598%, 10-Yr is

up 5.2bps at 1.6508%, and 30-Yr is up 6bps at 2.1371%.

TECHNICALS:

US 10YR FUTURE TECHS: (H0) Correcting

*RES 4: 132-02+ High Oct 3 and Oct 7 and key resistance

*RES 3: 131-29 Feb 3 high

*RES 2: 131-20+ High Feb 4

*RES 1: 131-04+ Intraday high

*PRICE: 130-18+ @ 15:58 GMT, Feb 5

*SUP 1: 130-13+ Low Jan 29 and key near-term support

*SUP 2: 129-21+ 50-day EMA

*SUP 3: 129-17+ Low Jan 23

*SUP 4: 129-12   Low Jan 22 

10yr futures have reversed direction for now and continue to unwind the recent

sharp rally. Yesterday's pullback saw prices fall through 130-30 support, the

Jan 31 low. This signals scope for a deeper pullback towards the Jan 29 low of

130-13+. The technical condition had recently entered an overbought zone and the

pullback marks an unwinding of the overbought condition. Initial resistance is

at today's 131-04+ intraday high.

JGB TECHS: (H0): 50-dma Key Support

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

*RES 2: 153.33 - 100-dma

*RES 1: 153.13 - High Jan 31

*PRICE: 152.54 @ 16:42 GMT, Feb 4

*SUP 1: 152.42 - 50-dma

*SUP 2: 151.62 - Contract lows, Dec 20

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

JGBs retreated further from the 2020 highs printed last week, with the 50-dma

acting as decent support Wednesday. To re-ignite bullish momentum, a break and

close above the 100- and 200-dmas layered just above would shift the outlook

nicely positive, but the risk of a pullback still looms large at present levels.

For bears to recapture any momentum, a close below the 50-dma would be needed,

opening 151.62 and the 151.11 mark beyond.

TSY FUTURES CLOSE: Broadly weaker through NY session on heavy volume (TYH>2.3M),

trading near early session lows after the bell, carry-over yld curves

steepening, 3M10Y well off early week inversion. Update: 

* 3M10Y  +5.344, 7.815 (L: -0.862 / H: 8.93)

* 2Y10Y  +2.013, 20.426 (L: 18.298 / H: 20.905)

* 2Y30Y  +2.795, 68.984 (L: 66.081 / H: 69.391)

* 5Y30Y  +1.617, 67.247 (L: 64.337 / H: 67.523); Current futures levels:

* Mar 2-Yr futures down 1.5/32 at 107-30.375 (L: 107-28.75 / H: 108-01.625)

* Mar 5-Yr futures down 6/32 at 119-21 (L: 119-16.75 / H: 119-31.5)

* Mar 10-Yr futures down 11/32 at 130-17.5 (L: 130-11.5 / H: 131-04.5)

* Mar 30-Yr futures down 1-0/32 at 161-3 (L: 160-31 / H: 162-20)

* Mar Ultra futures down 1-18/32 at 189-22 (L: 189-09 / H: 192-10) 

US TSY FUTURES: Broadly weaker through NY session on heavy volume (TYH>2.3M),

trading near early session lows after the bell, carry-over yld curves

steepening, 3M10Y well off early week inversion. Update: 

* 3M10Y  +5.344, 7.815 (L: -0.862 / H: 8.93)

* 2Y10Y  +2.013, 20.426 (L: 18.298 / H: 20.905)

* 2Y30Y  +2.795, 68.984 (L: 66.081 / H: 69.391)

* 5Y30Y  +1.617, 67.247 (L: 64.337 / H: 67.523); Current futures levels:

* Mar 2-Yr futures down 1.5/32 at 107-30.375 (L: 107-28.75 / H: 108-01.625)

* Mar 5-Yr futures down 6/32 at 119-21 (L: 119-16.75 / H: 119-31.5)

* Mar 10-Yr futures down 11/32 at 130-17.5 (L: 130-11.5 / H: 131-04.5)

* Mar 30-Yr futures down 1-0/32 at 161-3 (L: 160-31 / H: 162-20)

* Mar Ultra futures down 1-18/32 at 189-22 (L: 189-09 / H: 192-10)

US TSY FUTURES: Mar/Jun futures roll update. Friday, February 28 is first notice

(June futures take lead quarterly position). March futures don't expire until

mid-late March (10s, 30s and Ultras on 3/20, 2s & 5s 3/31). Session volume and %

complete update:

* TUH/TUM appr 21,300 from -5.75 to -5.12, -5.25 last; 7% complete

* FVH/FVM appr 29,300 from -12.25 to -11.25, -11.5 last; 5% complete

* TYH/TYM appr 12,800 from 4.25 to 5.25, 4.75 last; 4% complete 

* UXYH/UXYM nil, UXYH OI 936,892 coming into the session

* USH/USM appr 1,500 from 30.25 to 30.5, 30.25 last; 5% complete

* WNH/WNM appr 10,500 from -24.75 to -23.0, -23.0 last; 3% complete

US EURODLR FUTURES CLOSE: Weaker after the bell, lower half broad session range

on heavy volume; late buying lead quarterly evaporates, Block sales Reds

ongoing. Current White pack (Mar'20-Dec'20):

* Mar 20 steady at 98.315

* Jun 20 -0.010 at 98.405

* Sep 20 -0.025 at 98.495

* Dec 20 -0.030 at 98.525

* Red Pack (Mar 21-Dec 21) -0.045 to -0.03

* Green Pack (Mar 22-Dec 22) -0.05 to -0.045

* Blue Pack (Mar 23-Dec 23) -0.06 to -0.055

* Gold Pack (Mar 24-Dec 24) -0.06 to -0.055

US DOLLAR LIBOR: Latest settles

* O/N +0.0096 at 1.5751% (+0.0063/week)

* 1 Month +0.0034 to 1.6696% (+0.0077/wk)

* 3 Month +0.0042 to 1.7416% (-0.0095/wk)

* 6 Month +0.0153 to 1.7588% (+0.0136/wk)

* 1 Year +0.0281 to 1.8311% (+0.0245/wk)

US SWAPS: Spds running mostly wider after the bell, intermediates to long end

leading move on decent deal-tied paying and receiver unwinds, into midday, payer

unwinds in 10s and 30s late. Latest spd levels:

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

Wed 1530   -0.31/+6.31    +0.38/+0.88   +0.31/-4.19    +0.25/-32.25

1200       -0.06/+6.56    +0.38/+0.88   +0.69/-3.81    +0.69/-31.81

Wed Open   +0.06/+6.69    +0.00/+0.50   +0.19/-4.31    +0.00/-32.50

Wed 0730   -0.12/+6.50    -0.19/+0.31   -0.06/-4.56    +0.12/-32.38

Tue 1500   +0.19/+6.38    +0.00/+0.44   -0.06/-4.56    -0.06/-32.56

Tuesday recap: Spds running mildly wider, holding to narrow range amid decent

two-way flow in 2s, 3s and 5s leaning toward better paying, particularly in 2s

around 1.470-1.468%, earlier Eurodlr Red pack block swap-tied as well as

corporate issuance-tied hedging in 3s-5s.

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

* Daily Effective Fed Funds Rate: 1.59%, volume: $80B

* Daily Overnight Bank Funding Rate: 1.58%, volume: $202B

US TSYS: REPO REFERENCE RATES:

* Secured Overnight Financing Rate (SOFR): 1.60%, $1.161T

* Broad General Collateral Rate (BGCR): 1.58%, $419B

* Tri-Party General Collateral Rate (TGCR): 1.58%, $400B

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

06-Feb 0730 Jan challenger layoff plans (-25.2%, --)

06-Feb 0830 01-Feb jobless claims (216k, 215k)

06-Feb 0830 Q4 non-farm productivity (p) (-0.2%, 1.6%)

06-Feb 0830 Q4 unit labor costs (p) (2.5%, 1.3%)

06-Feb 0915 Dallas Fed Pres Kaplan, panel discussion Univ of Texas

06-Feb 1030 31-Jan natural gas stocks w/w

06-Feb 1630 05-Feb Fed weekly securities holdings

06-Feb 1915 Fed VC Quarles on eco outlook/mon-pol, Q&A

PIPELINE: Still waiting for Goldman Sachs to launch

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

02/05 $2B #Hyundai Capital America $1B 3Y +95, $500M each: 5Y +122.5, 7Y +147.5

02/05 $1.5B *OKB (Oesterreichische Kontrollbank AG) 5Y +12

02/05 $1B *IBRD (World Bank) 2024 Tap SOFR+28

02/05 $1B *Nationwide Building Society 3Y +27

02/05 $500M *First Republic 4NC3 fix-FRN +48

02/05 $500M #Exp/Imp Bk of Korea (KEXIM) 5Y +47.5

02/05 $400M #Synovus Bank 3NC2 fix-FRN 85

02/05 $500M #Southwest Air WNG 10Y +103

02/05 $Benchmark Goldman Sachs 10Y +97

On tap for Thursday

02/06 $500M EBRD (Environmental Sustainability Bond) 5Y 

Eurodollar/Tsy options 

Eurodollar options:

* +10,000 Jul 82 puts, 1.0 vs. 98.48/0.10%

* -15,000 Jul 82/83 strangles 14.5 over May 86 calls

* +20,000 short Mar 83/85 2x1 put spds, 1.5

* -4,000 Sep 85 calls, 13.5 vs. 98.505

* +4,000 Red Jun21 100 calls, 1.0

* +10,000 short Mar 87 calls, 5.5 vs. 98.645/0.32%

* -10,000 Jun 82/83 strangles, 10.5

* Update, total +15,000 short Jun 83/85/86 put trees, 3.0

* another 15,000 Sep 90/100 1x2 call spds, 3.0 net in pit vs. 98.47/0.10%, adds

to recent 10k Block

* BLOCK: 10,000 Sep 90/100 1x2 call spds, 3.0 net vs. 98.47/0.10%

* 10,000 Jul 82/83 strangles 17.5-18.0 splits vs. 20,000 Green Dec 88/91 call

spds, 6.5

* 5,000 Sep 85/88/91 call flys, 5.5

* 2,000 Jun 83 straddles, 16.5

* +10,000 Sep 85 puts, 0.5 earlier

buying into the implied vol implosion

* over +9,500 Jun 82/83 strangles, 10.5

* 5,000 Green Feb 85 puts, 1.0 on screen

* 5,000 Jun 87/90 call spds, 1.25

* 4,000 Apr 85/86 call spds, 1.5

* 2,000 Jun 82/83/85 put flys, 2.75

Screen/Block recap

* >60,000 Sep 87/92 call spds, 6.0 mostly screen

* Block -20,000 Red Mar 86/88 2x3 call spd closer, 0.5

* >14,000 Apr 87 calls, .75-1.0

* +20,000 Jun 86/87 call spds 1.25 over Jun 81 puts

* -25,000 Sep 99 calls, 3.5

Tsy options:

* +2,000 TYJ 132 calls, 19/64

* >+20,000 TYJ 130 puts, 38/64 vs. 130-18/0.40%

* 1,000 TYH 130.5 straddles, 58/64

* 5,000 TYM 134 calls, 15/64 vs. 130-18 earlier

* +2,500 TYM 128 puts, 18/64

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

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