US TSYS END FRIDAY AT SESSION HIGHS; EYE TAME CPI,N.KOREA,IRAN

     US TSYS SUMMARY: Treasuries ended around Fri highs amid mild N.Korea/Iran

FTQ bid after rally as mild 0.1% Core CPI calmed US inflation fears despite 0.5%

Sept CPI; also less-than expected 1.6% Sept. retail sales. 

- Tsys saw brisk fast$, CTA/black box short-cover buying after CPI, and FX-tied

buying too in Tsys by black boxes as US$ weakened. Most buying in 10Y Tsy

futures. But some real money accts and hedge funds jumped to sell into rally

after CPI or after strong 101.1 Oct Univ Michigan consumer sentiment. 

- Tsys saw earlier technical buying amid CPI, brief profit-tkg at high. Tsy 10Y

TYZ7 futures had 20K bought on screen from 125-22+ to 125-23 before 9:29 am.

Earlier two 5,000-contract blocks in TYZ7 10Y futures: one pre CPI, one after

apparent buy. 

- Before CPI, a big apparent 2Y Tsy futures sell block: 22.7K TUZ7 at 107-23+

8:28 am ET. Tsys had 8,160 FVZ7 5Y Tsy block buy at 117-17.75 at 11:02am ET. 

- Big Tsy futrs block:43.7K TYZ7 124.50 puts at '15 vs. TYZ7, 125-22+; looks

like 13K TYZ7 124 puts buy screen same time. 

- TSY 3PM ET:2Y 1.497%; 3Y 1.638%; 5Y 1.906%; 7Y 2,118%; 10Y 2.280%; 30Y 2.812%

US TSYS: /MBS: Taper begins but in Agency MBS to start: NY Fed said it will buy

a "maximum of $9.7B in Agency MBS over the period beginning Oct.16th 2017 on Fed

Trade." 

- Today's $9.7B schedule contrasted with the $15.03B bought in Agency MBS over

the Sept. 28th to Oct. 13th period; and the $13.65B of the Sept. 14-Sept. 27th

period, according to NY Fed website.

US TSY FUTURES CLOSE: US Tsy future closing higher at the bell, but off

intra-day highs. 5-yr and 10-yr block future buys seen shortly after soft US CPI

data along with some decent screen buying as well. While a large 2-yr future

block was sold just before CPI data. Current futures levels: 

* Dec Ultra bonds up 38/32 at 166-16 (165-03L/166-23H) 

* Dec 30-yr Bond futures up 28/32 at 153-31 (152-30L/154-05H) 

* Dec 10-yr futures up 9.5/32 at 125-22 (125-10L/125-25.5H) 

* Dec 5-yr futures up 5.25/32 at 117-18.5 (117-11L/117-20.75H) 

* Dec 2-yr futures up 1/32 at 107-25.5 (107-23.25L/107-26.25H)

US EURODLR FUTURES CLOSE: Futures trading higher, strip flatter after the bell

supported by softer than expected US CPI. Majority of the flow has been outright

selling and small micro-curve steepener trades in the front end of the strip as

prices ticked higher. While micro-curve flattening trades seen in the longer end

of the strip. Current White pack (Dec'17-Sep'18): 

* Dec 17 +0.01 at 98.5 

* Mar 18 +0.01 at 98.37 

* Jun 18 +0.015 at 98.27 

* Sep 18 +0.02 at 98.2 

* Reds (Dec 18-Sep 19) +0.025 to +0.035 

* Greens (Dec 19-Sep 20) +0.035 to +0.045 

* Blues (Dec 20-Sep 21) +0.045 to +0.05 

* Gold (Dec 21-Sep 22) +0.055 to +0.055

US SWAPS: Swap spreads are trading steady to wider at the bell. Decent flow seen

with a 2Y-10Y flattener in USD60.7k DV01 and a payer of a $210mln 2Y swap seen

overnight in Europe. While there appeared to be a payer in the belly of a

9Y-10Y-12Y swap fly for $231.2k DV01 and a number of paying and receiving in

10-yr and 2-yr during NY session. Latest spread levels: 

* 2Y +0.28/26.15 

* 5Y unch/8.06 

* 10Y +0.38/-3.81 

* 30Y +0.13/-32.31

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

-

- Oct 14 Annual IMF Meeting in Washington D.C. (daylong)

- Oct 14 Sec of Tsy Mnuchin speaks at 2017 IIF Annual Mtg DC

-

- Oct 15 Annual IMF Meeting in Washington D.C. (daylong)

- Oct 15 Fed Chr Yellen:global eco/growth:G30 Intl Bk Seminar DC Q/A 9am ET

- Oct 15 People's Bk of China hd Zhou: G30 Intl Bk Seminar DC Q/A 9am ET

- Oct 15 BOJ's Kuroda on econ/growth: G30 Intl Bk Seminar DC Q/A 9am ET

- Oct 15 ECB VP Constancio on econ/growth: G30 Intl Bk Sem DC Q/A 9am ET

-

- Oct 16 Oct Empire Manufacturing Index (24.4/20.0) 08:30am ET

- Oct 16 1130 am ET US Tsy $36.0B 26-Week Bill auction; 11:30 am ET

- Oct 16 1130 am ET US Tsy $42.0B 13-Week Bill auction; 11:30am ET

- Oct 16 Minn Fed Kashkari speaks at G100 Dinner Minneapolis; Q/A; 21:00pm ET

Eurodollar/Treasury option summary

Eurodollar Option flow included:

Pit/screen:

US EURODLR OPTIONS: Latest option flow seen:

* -10k Short Nov 82 calls vs Blue Mar 81 calls at 0.5 vs EDZ8 at 98.085, EDH1 at

97.82

* -2k Short Dec 81 straddle at 16

* +8k Short Nov/Dec 80 calendar put spread at 2 vs EDZ8 at 98.105

* +10k Front Sep 76 puts vs +10k Fed Dec 73 puts vs -10k Long Green Dec 72/71

put stupid net paid 12.5

* +3k Front Dec 87/86 1x2 call spread at 0.75 vs EDZ7 at 98.495

* -2k Short Nov 81 straddle at 10.5

* + 10k Fort Jan 78/77 put spread at 2 vs EDH9 at 98.06

* +2.5k Green Nov 81 calls at 2 vs EDZ9 97.965

* -1k Blue Dec 77 straddle vs +2k Long Blue Dec 77 straddle at 155.5

--- 

* +1k Front Sep 82 straddle at 29

* +4k Green Dec 77 puts at 3.5 vs EDZ9 at 97.935

* -7k Front Mar 83 puts at 7.5 vs EDH8 at 98.39

* +10k Front Dec 86 calls at 1.25 vs EDZ7 at 98.505

* +5k Short Dec 82/83/85 call tree at 1.5

* +100k Front Oct 85 puts at 0.25 vs EDZ7 at 98.50

* -100k Front Oct 85 calls at 0.25

* +5k Green Dec 78/77/75 put fly at 1.25

* -15k Front Oct 85 calls at 0.25

* -5k Blue Nov 77/75 put spread at 4 vs EDZ0 at 97.82

---

* 10k Front Oct 98.50 puts at 0.25 vs EDZ7 at 98.50 at 1338ET

* -10k Short Dec 82/83 call spread vs Short Dec 80 puts at 0.5 (+c/s,-p)before

1:46pm ET

* +5k Front Mar 83/82 put spread vs Front Mar 85 calls at 1.5 (+p/s,-c)

* Fed Mar 77/73 put spread at 6.5 vs EDH9 at 98.06

* 10k Front Oct 98.50 puts at 0.25 vs EDZ7 at 98.50 at 1334ET

* +5k Front Dec 85/83 put spread vs Short Dec 81/80 put spread at 1

* +10k Green Dec 82/85 call spread at 1.5 vs EDZ9 at 97.94

* +3k Short Dec 82/81 1x2 put spread at flat

* +5k Short Dec 82/81/78 put fly at 1

* -5k Green Nov 80 straddle at 14.5

--- 

* -10k Front Dec 85 calls at 4

* +5k Red 78/76 1x2 put spread at 5

* -5k Front Mar 83 puts at 7.5 vs EDH8 at 98.39

* -3k Green Jan 78 straddle vs Blue Jan 78 straddle at 53

* +10k Front Dec 85 straddle at 8.25

* -5k Front Nov 85 straddle at 4.5

* -20k Front Nov 85 put at 2.25 vs EDZ7 at 98.52

--- 

US TSY OPTIONS: ***More large 10-yr option blocks:

* 32.6k TYX7 123.50 puts at '01

* 17,735 TYX7 125 puts at '08 vs TYZ7 at 125-20+

- US TSY OPTIONS: Now seeing 10.87k TYX7 124.50 puts sold on screen at '03

- US TSY OPTIONS: ***Large 10-yr Tsy future block:

* 43.7k TYZ7 124.50 puts at '15 vs TYZ7 at 125-22+

* Looks like 13k TYZ7 124 puts were lifted on screen at the same time as well.

- US TSY OPTIONS: 10-yr Tsy option flow seen through screens:

* +2.5k TYZ7 125.50 puts at '35

----

* 10k Short Jan (0EF8) 98.875/98.75 put spread at 2 vs EDH9 at 98.06

* -20k Front Jan (EDF8) 98.375 straddle at 11 -- looks to be looking for 1 hike

in Dec and then on hold for first half of 2018, adds source

* +10k TYX7 125.00/124.50 1x2 put spread at 1 (bot the 1 leg, adds source)

* 7.5k Week 2 TY 125.50 Oct17 puts at '15 vs 4,725 TYZ7 @ 125-12 at 0822:40ET

* 10.25k TYX7 126/127 call spread at '08

* 5.5k Front Oct (EDV7) 98.50 calls at 0.25

* 5k Short Dec (0EZ7) 98.50 calls at 0.5

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

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