US TSYS:EARLY CHRISTMAS SURPRISE: STRONG 5Y AUCTION/RATE RALLY

US TSY SUMMARY: Bid by the early closing bell but off midmorning highs. Tsy

futures spiked after strong 5Y auction (stops 1.8bps through, w/dealers taking

21.48% vs. 25.0% avg). Futures topped overnight highs and come under mild

selling/profit taking from fast$; equities incidentally reversed course, trade

down to 3222.5. Yld curves mixed w/3M10Y flatter/off lows. 

- Strong out-sized move in gold as well, tapped 1497.74, currently 1496.32

+10.53; talk of program buys along w/Tsys post 5Y, risk off support for havens

ahead holidays.

- After a steady/mixed open, spds running wider across the board amid decent

flurry two-way flow after 5Y note auction: initial receivers in 2s from

1.720-1.7215%, two-way in 5s with better payers around 1.7340% has sector

dis-inverting today (earlier 5Y payers at 1.7652%), payer in 9s at 1.8450%;

early 7Y receiver at1.8105%.

- Heavy early Tsy option volume w/ +100k TYG 129/130 call spds, 11/64

- The 2-Yr yield is down 1.3bps at 1.639%, 5-Yr is down 2.5bps at 1.724%, 10-Yr

is down 1.9bps at 1.9102%, and 30-Yr is down 1.6bps at 2.3406%.

TECHNICALS

US 10YR FUTURE TECHS: (H0) Focus Is On Key Support

*RES 4: 130-04+ High Dec 3

*RES 3: 129-14   High Dec 12 and near-term bull trigger

*RES 2: 129-02   High Dec 13

*RES 1: 128-23+ High Dec 17

*PRICE: 128-03  @ 13:21 GMT, Dec 24

*SUP 1: 127-29   Low Dec 13 and bear trigger

*SUP 2: 127-18+ 1.618 projection of the Oct 3 to Nov 7 low from Dec 3 high

*SUP 3: 127-00   Round number support

*SUP 4: 126-31+ 1.764 projection of the Oct 3 to Nov 7 low from Dec 3 high

10yr futures are consolidating for now. The outlook though remains bearish with

attention on the 127-29 key support. A breach would confirm a resumption of the

broader downtrend and maintain the bearish price sequence of lower lows and

lower highs. This would open 127-18+, a Fibonacci projection and, the 127-00

level. On the upside, initial resistance is seen at 128-23+ however, a break

above 129-14, Dec 12 high is needed to reverse the outlook.

AUSSIE 3-YR TECHS: (H0) Vulnerability Resumes

*RES 4: 99.400 - Low Nov 29

*RES 3: 99.360 - High Dec 12

*RES 2: 99.335 - High Dec 13 

*RES 1: 99.300 - High Dec 17

*PRICE: 99.120 @ 13:23 GMT Dec 24

*SUP 1: 99.120 - Low Dec 23

*SUP 3: 99.083 - 200-dma 

*SUP 4: 99.070 - Low Nov 8

*SUP 4: 99.000 - Handle Support

After a poor week, Tuesday's session also did little to instill confidence in

bulls, ekeing to a new low of 99.120. The slip through 99.200 last week is

significant and prefaced a show below 99.162. This opens the 99.083 200-dma and

the Nov 8 low beyond. On the upside, resistance is at 99.335, Dec 13 high.

AUSSIE 10-YR TECHS: (H0) Remains Weak

*RES 3: 98.9500 - High Dec 5

*RES 2: 98.8950 - High Dec 10 and 11

*RES 1: 98.8850 - High Dec 5

*PRICE: 98.6700 @ 13:25 GMT, Dec 24

*SUP 1: 98.6550 - Low Dec 20 

*SUP 2: 98.6500 - Low Nov 8/11

*SUP 3: 98.5785 - 3.0% Lower Bollinger Band

Aussie 10yr futures weakened further for a particularly negative close Friday,

edging below the 200-dma for the first time in over a year. This switches the

picture to outright bearish and opens further losses down to levels not seen

since mid-July. The RSI is also yet to indicate oversold conditions, meaning the

run lower could still have legs. For bulls to slow any decline they first need

to recoup the 200-dma before eyeing the Dec 5 at 98.8850.

JGB TECHS: (H0): Outright Bearish

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

*RES 2: 153.11 - High Dec 4

*RES 1: 152.50 - High Dec 9

*PRICE: 151.83 @ 13:35 GMT, Dec 24

*SUP 1: 151.62 - Contract lows, Dec 20

*SUP 2: 151.11 - 76.4% August 2018 - September 2019 Rally

*SUP 3: 150.61 - 1.0% lower 10-dma envelope

The outlook for JGB futures flipped to outright bearish Friday as losses

persisted into the close. This opens renewed pressure south of the 151.00 handle

to levels not seen since December last year. A clear downtrend remains in  place

though with a price sequence of lower lows and lower highs evident. The trigger

for a fresh round of weakness turns to the 151.11 Fib retracement. A break here

would open the 1.0% lower 10-dma envelope at 150.61. 

MONTH-END EXTENSIONS: Preliminary 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.................0.06........0.08........0.06

*Agencies................0.08........0.10........0.05

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

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

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

*Aggregate...............0.07........0.08........0.05

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

*Interm Credit...........0.05........0.08........0.06

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

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

*High Yield..............0.11........0.08........0.04

TSY FUTURES CLOSE: Bid across the board, off post 5Y auction highs by the early

close. Yld curves mostly flatter/off lows. Update:

* 3M10Y  -2.550, 33.501 (L: 31.504 / H: 36.25)

* 2Y10Y  -0.404, 26.897 (L: 25.773 / H: 27.869)

* 2Y30Y  -0.112, 69.916 (L: 68.302 / H: 70.693)

* 5Y30Y  +0.857, 61.472 (L: 59.177 / H: 61.887)

Current futures levels:

* Mar 2-Yr futures up 1/32  at 107-20.125 (L: 107-18.25 / H: 107-20.375)

* Mar 5-Yr futures up 4.25/32  at 118-12.5 (L: 118-05.75 / H: 118-13.5)

* Mar 10-Yr futures up 6.5/32  at 128-9.5 (L: 128-00 / H: 128-12.5)

* Mar 30-Yr futures up 13/32  at 156-9 (L: 155-18 / H: 156-18)

* Mar Ultra futures up 20/32  at 182-27 (L: 181-22 / H: 183-12)

US EURODLR FUTURES CLOSE: Modestly bid across the strip by the early close.

Current White pack (Mar 20-Dec 20):

* Mar 20 +0.005 at 98.230

* Jun 20 +0.005 at 98.285

* Sep 20 +0.010 at 98.340

* Dec 20 +0.015 at 98.350

* Red Pack (Mar 21-Dec 21) +0.020 to +0.030

* Green Pack (Mar 22-Dec 22) +0.025 to +0.030

* Blue Pack (Mar 23-Dec 23) +0.025 to +0.030

* Gold Pack (Mar 24-Dec 24) +0.020 to +0.025

US DOLLAR LIBOR: Latest settles

* O/N -0.0014 at 1.5331% (-0.0035/week)

* 1 Month +0.0127 to 1.8047% (+0.0256/wk)

* 3 Month +0.0139 to 1.9605% (+0.0258/wk)

* 6 Month -0.0032 to 1.9212% (+0.0006/wk)

* 1 Year +0.0105 to 2.0120% (+0.0124/wk)

US SWAPS: After a steady/mixed open, spds running wider across the board amid

decent flurry two-way flow after 5Y note auction: initial receivers in 2s from

1.720-1.7215%, two-way in 5s with better payers around 1.7340% has sector

dis-inverting today (earlier 5Y payers at 1.7652%), payer in 9s at 1.8450%;

early 7Y receiver at1.8105%. Latest spd levels:

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

1100        +0.12/+7.38    +0.62/+0.50   +0.38/-4.00    +0.25/-29.00

0930        +0.00/+7.25    -0.06/-0.19   -0.12/-4.50    +0.00/-29.25

Tue Open    +0.00/+7.25    +0.06/-0.06   -0.12/-4.50    +0.00/-29.25

Tue 0715    +0.00/+7.25    +0.12/+0.00   -0.12/-4.50    +0.00/-29.25

Mon 1500    -0.50/+7.19    +0.00/+0.06   -0.25/-4.38    -0.38/-29.12

Monday recap: Quiet week opener for swaps, limited flow with payer unwinds in

long end from real$. 

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

* Daily Effective Fed Funds Rate: 1.55%, volume: $69B

* Daily Overnight Bank Funding Rate: 1.54%, volume: $191B

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

* Secured Overnight Financing Rate (SOFR): 1.52%, $1,027B

* Broad General Collateral Rate (BGCR): 1.50%, $372B

* Tri-Party General Collateral Rate (TGCR): 1.50%, $350B

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

26-Dec 0700 20-Dec MBA Mortgage Applications (-5.0%, --)

26-Dec 0830 21-Dec jobless claims (234k, 220k)

26-Dec 1300 US Tsys $32B 7Y Note (912828YX2) auction

26-Dec 1630 25-Dec Fed weekly securities holdings

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

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

12/23-12-27 No new issuance expected for shortened week

-

12/16-12/20 No new US$ issuance last Monday-Friday; $21.07B/month

Eurodollar/Tsy options 

Eurodollar options:

* +2,000 Mar 80/81/82 put flys, 4.0

* +1,000 Dec/Red Mar 83 straddle strips earlier, 75.0

* +3,200 Sep 83/85 call spds, 3.0 mostly on screen

* -2,500 Jan 82/83 2x1 put spds, 8.0

* +3,000 Apr 82/short Apr 81 put spds, 1.0, front Apr over

* 34,000 Mar 83/85 call spds, 0.75

* +10,000 Mar 80 calls vs. 82/86 call spds on a 2x7 ratio, 28.5 package adds to

appr +10k yesterday at 29.0

* -2,500 Jan 82/83 2x1 put spds, 8.0

* +3,000 Apr 82/short Apr 81 put spds, 1.0, front Apr over

* -27,000 Mar 80/81 put spds, 0.5

Tsy options:

* 3,100 FVG 118.5/119.5 call spds, 11.5

* -11,000 TYG 127 puts, 14- to 15/64

* 3,500 TYG 128/130.5 1x2 call spds, 33/64

* -2,000 TYH 128 straddles, 1-13/64

* -6,000 TYG 126/130 put over risk reversals, 1/64 vs. 128-00

* hearing buyer 4,000 USH 130 puts at cab-7

* +33,000 TYG 128.5/129.5 call spds, 17/64

* -2,400 TYG 127/129 strangles, 29/64

Early screen trade -- largest trade going by far

* +98,000 TYG 129/130 call spds, 11/64

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

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