US TSYS EBB OFF SAFE-HAVEN HIGHS; TRUMP, FED CHR YELLEN MEET

     US TSYS SUMMARY: Treasuries ended Thu higher after drift off midmorning

safe-haven rally highs hit amid concern on Spain/Catalan rift, N.Korea nuclear

saber-rattling and tax reform uncertainty. 

- Tsy had a solid $5B 30Y TIPS reopen: 0.908% rate, good 76.4% indirects, 0.50%

directs, leaving only a small 23.1% portion for dealers. Tsys saw long end

bounce from mid-week rout. US stocks receded from record high amid profit-tkg,

later consolidation. White Hse confirmed US Pres. Trump concluded his  meeting

today at 2:40pm ET with Fed Chr Yellen; earlier press pool report said it was a

lunch, that has been since corrected to be just a meeting, not a lunch; Yellen

is among 5 finalists for Fed Chr post. 

- There was not much of react to -22K initial weekly jobless claims decline to

222K in Oct. 14 week, the lowest initial claims level since March 31, 1973. Tsys

inched higher after topping overnight highs in long end prior to data release.

Flows had better buying in 10s-30s from prop, real$ and bank portfolios, FX-tied

buys as US$ softened vs. Yen. Chatter of asset allocation out of stocks into

Tsys. 

- Swap curve: deal-tied hedging, recent flow 5s10s spd flattener, 5s7s10s fly,

paying belly, small 4Y payer at 1.9825%. 

- TSYS 3PM ET: 2y 1.555%, 3Y 1.687%, 5Y 1.975%, 7Y 2.174%, 10Y 2.321%, 30Y

2.827%

US TSY FUTURES CLOSE: Risk-on took a break today, Tsy futures trading higher by

midday, well off first-half highs on decent volume (TYZ more than 1.1m). Long

end bounce from mid-wk rout, 30y yld 2.829%, 10y yld 2.323%. Heavy volume by the

open (TYZ>465k) as stocks receded from record highs, profit taking more than a

systemic shift in sentiment - exogenous factors remain: N. Korea nuclear saber

rattling, Catalan/Spain rift, tax reform uncertainty. Mkts await det's of Pres

Trump meet w/Fed chair Yellen; chances of reappointment appr 24%, Powell still

ahead at 44% (PredictIt). Current futures levels: 

* Dec Ultra bonds up 21/32 at 166-01 (165-06L/166-25H) 

* Dec 30-yr Bond futures up 16/32 at 153-17 (152-29L/154-02H) 

* Dec 10-yr futures up 3.5/32 at 125-08 (125-02.5L/125-16H) 

* Dec 5-yr futures up 1.5/32 at 117-08.25 (117-05.5L/117-13.75H) 

* Dec 2-yr futures up 1/32 at 107-22.75 (107-21.5L/107-24.25H)

US EURODLR FUTURES CLOSE: Trading modestly higher by the close, well off

mid-morning highs to lower half of range. Better volume in first half tapered

off late. Rate hike chances ease slightly, Dec back below 80% to 79.7%, March at

46.6%. Current White pack (Dec'17-Sep'18): 

* Dec'17 +0.010 at 98.500 

* Mar'18 +0.010 at 98.360 

* Jun'18 +0.015 at 98.250 

* Sep'18 +0.025 at 98.170 

* Red pack (Dec'18-Sep'19) +0.030-0.020 

* Green pack (Dec'19-Sep'20) +0.020-0.015 

* Blue pack (Dec'20-Sep'21) +0.015-0.010 

* Gold pack (Dec'21-Sep'22) +0.010

US SWAPS: Spds running steady to mixed by the bell, spd curve steepening out

after drifting flatter for much of the session. Risk-off tone outweighed light

deal-tied compression earlier, fast$ mild rate payers 2s-5s coming into the

session. In addition to some light deal-tied hedging, recent flow includes 5s10s

spd flattener, 5s7s10s fly, paying the belly, small payer in 4Y at 1.9825%. Late

morning receiving from insurance portfolio gave way to decent paying in long end

as spd curve steepened. OTC swaption vol mildly higher across the surface;

ongoing heavy put volume in exchange traded options. Latest spread levels: 

* 2Y -0.12/24.50 

* 5Y -0.06/8.31 

* 10Y +0.38/-2.00 

* 30Y +0.38/-29.88

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

- Oct 20 Sep existing home sales (5.35M, 5.30M) 1000ET

- Oct 20 Sep BLS state payrolls (85.4K, --) 1000ET

- Oct 20 Q4 St. Louis Fed Real GDP Nowcast (3.10%, --) 1100ET

- Oct 20 Q4 NY Fed GDP Nowcast (+1.7, --) 1115ET

- Oct 20 Clv Fed Mester Glbl Fin Future:Populism,Tech,Reg, NY Q/A 1400ET

- Oct 20 Fed Chr Yellen at NEC Stein Memorial Dinner; DC Q/A 1930ET

Eurodollar options

Pit/screen:

Package total (pit/Block)

* +120,000 Green Nov 77 puts, 2.5

* -60,000 Blue Nov 76 puts, 2.5

* -60,000 Gold Nov 75 puts, 2.5, even net/package

-------------------------

* 10,000 Green Dec 77/Gold Dec 72 put spds, 3.5 cr/flattener

* -5,000 Green Dec 80/81 call spds vs. Green Dec 76/77/78 put flys, 0.5 net

* +35,000 short Sep 75 puts, 7.5 vs. 97.95/0.22%

* +5,500 Feb 81/82/83 2x3x1 put flys, 2.0

* +2,500 short Jun 80 straddles, 36.5

* -75,000 Sep 81/82 put spds, 6.5 vs. 98.165/0.14%, adding to -100k Wed at 7.0

(open interest down 64.5k and 81.7k respectively as a result of Wed's trade)

* 3,000 Blue Dec 75/80 call over risk reversals, 1.0 vs. 97.775/0.36%

* 1,000 Blue Nov 76/80 put over risk reversals, 1/64 vs. 97.755/0.30%

* -5,000 short Mar 76/77 put spds vs. +short Mar 85 calls, 0.0 net

* -5,000 Green Dec 76/77 put spds vs. +Green Dec 82/83 call spds, 2.0

* 2,500 Green Dec 76/77 put spds, 3.0

* 2,500 Green Dec 82/83 call spds, 1.0

* +80,000 short Dec 78 puts, 2.0, ongoing buyer (+300k/wk)

* total 30,000 (5k Block vs. EOZ 81/83c spd) Green Dec 82/85 call spds, 0.5

* 10,000 Green Dec 81/82 1x2 call spds,

* 5,000 Green Dec 80 calls

* 10,000 short Nov 77/78/80 put flys (total 47k EOX 78 puts)

* 5,000 short Nov 78/82 strangles or combos

* 4,000 short Nov 81/82 1x2 call spds

* 7,000 Nov 86 calls

* 8,100 Dec 86 calls

Tsy options

Pit/screen

* -6,500 FVZ 116/116.5 put spds, 3/64

* 1,000 TYZ 125/126 strangles vs. 2,000 TYZ 124/127, 11/64 net

* 1,700 TYZ/TYF 123/127 strangle spd, 14/64

* 1,250 TYZ 125.5 straddles, 1-14/64

* Update, total +12,500 FVZ 117.5/118.25/119 call flys, 9.5- to 9/64

* +4,000 FVZ 117.5/118.25/119 call flys, 9/64

* 2,000 wk1 TY 126.2/127.2 1x2 call spds, 3/64

* +4,500 TYX 125 puts w/1,500 TYZ 124 puts, 23/64 total

* +1,000 FVX 117.25 straddles, 24/64

* 1,000 wk3 US 154.5/155/155.5 call trees 2/64

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

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