US TSYS DRIFT LOWER; US HOUSE PASSED TAX BILL BY 225-205 VOTE

     US TSYS SUMMARY: Treasuries ended Thursday lower as the week's flattening

rally paused. Mkt digested a good/okay $11B 10Y TIPS reopening: 0.512% rate,

good 69.04% indirects, moderate 4.78% directs, 26.2% dealers. 

- US House voted 225-205 to approve tax package along party lines; AP said it

would cut "taxes for corporations & many people." 

- Tsys generally held a lower range through the day, then drifted back toward

session lows late; curve steepened mildly on the day after recent flattening to

10-year flattest levels. Moderate risk-off unwind, cautious risk-on tone with

equities rebounding. 

- Tsys opened with moderately heavy volume, volume moderating into midday.

Little react to weekly claims (+10k to 249k) and import price. Oct IP production

surged +0.9 vs. expected 0.5% rise. Fed's Mester sees economy and inflation

picking up. 

- Eurodollar futures lower, heavy short end volume/sales EDZ8 after 3M LIBOR

climbed +0.0138 to 1.4357% (+0.0198/wk); large -12.5k EDH9 1Y bundle block sales

-0.027-0.030. 

- Swap spds mildly wider amid light paying by fast$ in forwards (outright,

switch and flys). Light corporate issuance adding to move, supply expected to

evaporate into Thurs Nov. 23rd Thanksgiving holiday. There also will be a 2pm ET

Friday Nov. 24th early close. 

- US TSYS 3PM ET: 2Y 1.712%; 3Y 1.825%; 5Y 2.065%; 7Y 2.243%; 10Y 2.361%; 30Y

2.805%

US TSY FUTURES CLOSE: Curve flattening rally took a break Thu, Tsys opened/held

mildly lower levels all day - modest rebound for curve off 10 year lows (2s/10s

+.883 to 64.357 vs. 65.121H). Moderate risk-off unwind, cautious risk-on tone

with equities rebounding. Current futures levels: 

* Dec Ultra bonds down 24/32 at 166-21 (166-19L/167-28H) 

* Dec 30-yr Bond futures down 14/32 at 153-18 (153-16L/154-09H) 

* Dec 10-yr futures down 6/32 at 124-27.5 (124-25L/125-04H) 

* Dec 5-yr futures down 3.5/32 at 116-30 (116-28L/117-02.25H) 

* Dec 2-yr futures down 1.5/32 at 107-15.75 (107-15.5L/107-17.5H)

US EURODLR FUTURES CLOSE: Trades lower, heavy short end volume/sales EDZ8 after

3M LIBOR climbed +0.0138 to 1.4357% (+0.0198/wk); large -12.5k EDH9 1Y bundle

block sales -0.027-0.030. Current White pack (Dec'17-Sep'18): 

* Dec'17 -0.005 at 98.462 

* Mar'18 -0.015 at 98.295 

* Jun'18 -0.025 at 98.160 

* Sep'18 -0.030 at 98.080 

* Red pack (Dec'18-Sep'19) -0.025-0.030 

* Green pack (Dec'19-Sep'20) -0.025-0.030 

* Blue pack (Dec'20-Sep'21) -0.030-0.035 

* Gold pack (Dec'21-Sep'22) -0.030-0.035

US SWAPS: Relative quiet for swap spds again, mildly wider amid light paying by

fast$ in forwards (outright, switch and flys). Note, 10yr spd near dis-inverting

first time since late March. Light corporate issuance adding to move, supply

expected to evaporate heading into Thanksgiving holiday. OTC vol steady to

mixed, upper left and lower right of grid softer, 1-3M gamma on 10Y tails

steady/higher. Latest spread levels: 

* 2Y +0.38/17.75 

* 5Y +0.62/5.94 

* 10Y +0.81/-0.38 

* 30Y +0.88/-23.00

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

- Nov 17 Oct housing starts (1.127M, 1.190M) 0830ET

- Nov 17 Oct building permits (1.225M, 1.245M) 0830ET

- Nov 17 Q3 e-commerce retail sales (4.8%, --) 1000ET

- Nov 17 Oct BLS state payrolls (-59.2k, --) 1000ET

- Nov 17 Q3 Advance NSA Service Revenue (+3.2%, --) 1000ET

- Nov 17 Nov Kansas City Fed Mfg Index (23, --) 1100ET

- Nov 17 Q4 St. Louis Fed Real GDP Nowcast 1100ET

- Nov 17 Q4 NY Fed GDP Nowcast 1115ET

Eurodollar/Treasury option summary

Eurodollar options

Pit/screen:

* -10,000 Dec 83/85 strangles, 1.25 vs. 98.467/0.25%

* -7,500 short Jun 82/85 1x2 call spds, 1.0

* +5,000 Dec 85 calls, 1.0

* -5,000 Blue Sep 78 calls, 15.5

* total +10,000 Mar 83/85/86 call flys, 1.75

* Update, total -20,000 short Jun 80 puts w/Green Jun 76/77 put, 50.5 total

credit

* +45,000 (pit/screen) short Dec 78 puts, 1.0, adds to earlier +50k Block buy

* 15,000 short Feb 77 puts, 2.0 vs. 97.97/0.12%

* 2,000 short Mar 78/Green Mar 76 put strip, 13.0

* 2,000 Mar 83 straddles, 14.0

* -10,000 short Jun 78 puts, 13.5 vs. 97.915/0.46%

* 5,000 Jun 80/81 put spds, 4.5 vs. 98.165/0.20%

Latest Block, 0913:26-0915:23ET,

* total 50,000 short Dec 78 puts, 1.0

* +23,000 (pit/screen) Red Sep19 83/87 call spds vs. selling short Jun 87 calls,

4.5 net debit

* total +75,000 Red Dec'18 75/77 put spds, 4.25 legs

* +50,000 Red Dec'18 75/77 put spds, 4.25 legs

* +10,000 Mar 83/85/86 call flys, 1.75

* 1,750 short Dec 83/Green Dec 82 2x1 call spds, 1.0

* 7,000 short Jun 77/78/80/81 put condors, screen

Tsy options

Pit/screen:

* total +4,000 FVZ 117 straddles, 17/64

* 1,800 TYH 124 puts, 44/64 vs. 124-19.5

* total 2,300 TYZ 124.75/TYF 123.5 put spds, 1/64

* 1,200 USZ 145/USH 144 call spds, 6/64

* 1,100 TYZ 124.75/TYF 123.5 put spds, 1/64

* +5,200 TYH 120.5 puts, 6/64 screen

* 40k+ TYZ 124.5 puts at 8/64 vs. TYF 124 puts at 23/64

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

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