US TSYS DRIFT LOWER INTO LONG CHRISTMAS HOLIDAY WEEKEND

US TSYS SUMMARY: US Treasuries ended a shortened Friday pre-Christmas session

mildly lower and curves flatter after rangebound trading and light volume. Pres.

Trump signed the major US tax reform bill. 

- The market digested lower than expected 1.3% Nov Durable goods and -0.1%

ex-transport, and 0.1% Nov Core PCE price index, yr/yr 1.5% (highest since June)

and 17.5% Nov new home sales surprised to upside. 

- Tsys saw a tight range, but initial mixed curve action, a few flurries and

then all curves turned flatter, esp 2/10Y, 2/30Y and to a lesser extent 5/30Y.

Tsys did not see major sellers despite 2/5/7Y auction supply next week, as there

is geopolitical event risk through a long Christmas holiday weekend (US bonds

out Mon, UK out Mon/Tues.) 

- Sister market bonds may be hit by bid list sales into year-end; was CMBS brisk

selling on Thurs. Mideast earlier in week sold Tsys intermed /vs. bought US

stocks. 

- Tsys supported late as US$/yen softened up a bit. Looking forward, Tsy supply

starts quick next week: Tues 1pm ET $26B 2Y sale. Corporate bond issuers are

silent now, back in action next year. 

- O/N RP saw 2Y, 5Y, old 3Y, 6M Bill all tight; Tsy G/C was at 1.53%. 

- US SWAPS: $200M 5Y payer around 2.2974-2.29232%; $301.4K 4/5/10Y fly, paying

belly. 

- TSYS 1PM ET: (Early close) 2Y 1.891%, 3Y 2.008%, 5Y 2.252%, 7Y 2.396%, 10Y

2.486%, 30Y 2.838%

US TSY FUTURES: Mildly lower across the curve on light volume. Latest curve

update:

* 2s10s -1.112, 58.985 (60.894H/58.751L)

* 2s30s -1.944, 94.079 (96.753H/93.979L)

* 5s30s -1.278, 58.227 (59.942H/57.979L). Current futures levels: 

* Mar Ultra bonds down 2/64 at 164-24 (164-13L/164-26H)

* Mar 30-yr Bond futures down 4/32 at 151-02 (150-28L/151-04H)

* Mar 10-yr futures down 1.5/32 at 123-15 (123-14L/123-17.5H)

* Mar 5-yr futures down 1.5/32 at 115-28.25 (115-28.25L/115-30.5H)

* Mar 2-yr futures down 1/32 at 106-31.75 (106-31.75L/107-01.5H)

US EURODLR FUTURES: Steady mixed into the early close. Current White pack

(Mar'18-Dec'18):

* Mar'18 +0.000 at 98.205

* Jun'18 -0.010 at 98.040

* Sep'18 -0.015 at 97.925

* Dec'18 -0.010 at 97.820

* Red pack (Mar'19-Dec'19) -0.015-0.020

* Green pack (Mar'20-Dec'20) -0.010-0.020

* Blue pack (Mar'21-Dec'21) -0.005

* Gold pack (Mar'22-Dec'22) +0.050-0.015

US SWAPS: Spds mostly tighter by the early close, spd curve flatter heading into

the extended holiday weekend. Earlier flow included $200M payer in 5s around

2.2974-2.29232% and $301.4k 4Y-5Y-10Y Fly, paying the belly. Coming into the

session, spds were running marginally mixed in the short end to steady out the

curve on light curve flow, 4s5s and 7s10s steepeners. OTC vol steady/firmer into

extended holiday weekend, gamma outperforming. Latest spread levels:

* 2Y  +0.25/20.81

* 5Y  -0.44/4.38

* 10Y -0.69/-2.12

* 30Y -1.25/-21.88 

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

- Dec 26 Oct Case-Shiller Home Price Index (0.5, --) 0900ET

- Dec 26 Dec Richmond Fed Mfg Index (30, --) 1000ET

- Dec 26 Dec Dallas Fed manufacturing index (19.4, --) 1030ET

- Dec 26 US Tsy $39B 6-Month Bill auction 1130ET

- Dec 26 US Tsy $45B 3-Month Bill auction 1130ET

- Dec 26 US Tsy $26B 2Y Note Auction 1300ET

- Dec 26 US Tsy $50B 4-Week T-Bill Auction 1300ET

Eurodollar/Treasury Option Summary

Eurodollar options, Pit/screen:

* 15,000 Green Sep 78 calls, 10.0vs. 97.595/0.30%

* 10,000 Jun 78/80 2x1 put spds, 2.5 vs.

* 5,000 Apr 78/80 put spds, 3.5

* total 10,000 long Green Jun 67/71 2x1 put spds, 0.0

* 4,000 long Green Jun 67/71 2x1 put spds, 0.0 vs. 97.625/0.10%

* total +20,000 short Jun 81 calls, 3.0 pit/screen

* +15,000 Green Jun 80 calls, 4.5 vs. 97.615/0.18

* -9,000 Red Dec'19 70/72 2x1 put spds, 2.0 to 1.5 vs. 97.61/0.10%

* -5,000 short Jan 77/78 call spds, 4.5 w/

* -5,000 short Feb 76/78 put spds, 11.5, 16.0 total credit/package

* +2,500 Green Jun 76/Blue Jun 75 straddle strip, 68.0 total db

* +20,000 Jun 78/80 put spds 1.5 over the Dec 75/76 put spds

* +10,000 short Mar 76/77 put spds, 4.5

* 4,000 Dec 80 puts, 23.5

* total 10,000 Green Dec 73/75 put spds 1.0 over the 82 calls blocked earlier

Tsy options, Pit/screen:

* 2,000 FVG 116.25 calls, 9.5/64 vs. 115-28.5/0.30%

* 1,000 USG 151/153 1x2 call spds, 8/64

* 4,000 USG 152/153/154 call flys, 7/64, vs. 150-28

* -2,000 TYG 123.5 straddles, 1-3/64

* Update, -9,000 TYF 123/124 put spds, 33/64 on screen, adds to -8k from 30- to

31/64 on Wed

* 3,000 FVF 116/FVG 115.5 put spds, 3.5/64

* -2,500 TYF 123.5 straddles, 6/64 and offered

* -1,100 TYG 123/125.5 strangles, 54/64

* 1,250 TYF 123.7 conversions, 0.0

* 2,500 wk5 FV 116 calls, 5.5/64 vs. 115-29.5

* TYF 123.5 straddle trading 7/64 small

* USF 151 straddle from 19- to 15/64

--MNI New York Bureau; tel: +1 212-669-6432; email: sheila.mullan@marketnews.com

[TOPICS: MTABLE,MNUEQ$,M$U$$$,MR$$$$,M$$FI$,MN$FI$]