US TSYS: EQUITIES SINK LOWER, DEC'18 RATE HIKE ODDS MODERATE

US TSY SUMMARY: Tsys trade mixed by the bell, yld curves mildly flatter all day

w/long end outperforming. Heavy overall futures volume padded by increase in

Dec/Mar roll trade. General risk-off tone as equities chopped lower (tech and

some bank stocks initially blamed, midday buyers FANG basket helped SPX bounce

before resuming slide late). US$ index gained (+.669 at 96.862), while Crude

hammered back to mid-Dec'17 levels (WTI -3.90 to 53.30).

- Otherwise, relative quiet/range-bound trade ahead flurry of midweek data ahead

Thu's Thanksgiving holiday closure and early close Fri.

- Two-way flow w/better front end selling, some mild deal-tied hedging,

aforementioned Dec/Mar Tsy roll volume. modest flatteners/steepener unwinds in

2s10s and 5s30s. Large upside call buying in early 2019 TY low-delta calls on

day, hedging potential for no Dec rate hike and/or combo of rate cut. 

- Block sales -20k TUH unwinds small portion of better buys last 2 weeks.

- Tsy cash/ylds: 2Y 100-04.5 (2.797%), 5Y 100-00.5 (2.870%), 10Y 100-20

(3.050%), 30Y 101-09 (3.306%).

TECNICALS: 

US TSY FUTURES CLOSE: Trading mixed with the long end outperforming; in the

middle of the range on strong volume (TYZ 1.98M); curves flattening; update:

* 2s10s -2.251, 24.893 (24.685L/27.118H);

* 2s30s -2.414, 50.572 (49.890L/53.029H);

* 5s30s -1.720, 43.266 (42.723L/44.999H);

Current futures levels:

* Dec Ultra bonds up 11/32 at 151-27 (151-10L/152-08H)

* Dec 30-yr Bond futures up 09/32 at 140-02 (139-19L/140-09H)

* Dec 10-yr futures up 1.5/32 at 119-11 (119-06L/119-14H)

* Dec 5-yr futures down 01/32 at 112-29.25 (112-27.75L/113-00H)

* Dec 2-yr futures down 01/32 at 105-16 (105-15.5L/105-17.25H)

US TSY FUTURES: Late roll volume update. December future's staggered expiration

on December 19 for 10s, 30s and Ultras, and December 31 for 2s and 5s. Latest

volume and % complete as of prior session close:

* TUZ/TUH appr 50.5k, 0.5 last; 10.0% complete

* FVZ/FVH appr 123.0k, 1.75 last; 9.0% complete

* TYZ/TYH appr 71.8k, 5.25 last; 5.0% complete

* USZ/USH appr 26.6k, 19.7 last; 2.0% complete

* WNZ/WNH appr 41.4, 25.25 last; 5% complete

* Some roll research from RBC: they say there is "likely to be a wave of 1.375%

coupon early delivery in TUZ8, followed by another wave of late delivery of the

2.75% coupon. In March, we might see some early delivery in TUH9 (depending on

where the WIs come), as well as some March 21st early delivery in FVH9." 

* In the long end RBC posits March ultra-bond "looks a bit rich to December, but

the enormous asset manager long is likely to dominate the price action," while

in 30Y a "very large asset manager long is likely to dominate this roll also."

US EURODOLLAR FUTURES CLOSE: Trading slightly lower with a parallel shift across

the strip; strong volume. Current White pack (Dec'18-Sep'19):

* Dec'18 -0.0050 at 97.2650

* Jun'19 -0.005 at 97.170

* Jun'19 -0.005 at 97.070

* Sep'18 -0.010 at 97.000

* Red pack (Dec'19-Sep'20) -0.010

* Green pack (Dec'20-Sep'21) -0.010-0.005

* Blue pack (Dec'21-Sep'21) -0.010

* Gold pack (Dec'22-Sep'22) -0.010-0.005

US DOLLAR LIBOR: Latest settles, 

* O/N -0.0079 to 2.1728% (-0.0025/wk)

* 1 Month +0.0053 to 2.3055% (+0.0047/wk)

* 3 Month +0.0073 to 2.6531% (+0.0086/wk)

* 6 Month -0.0025 to 2.8632% (+0.0006/wk)

* 1 Year -0.0102 to 3.0971% (-0.0265/wk)

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

* Secured Overnight Financing Rate (SOFR): 2.24% vs. 2.26% prior, $863B

* Broad General Collateral Rate (BGCR): 2.22% vs. 2.25% prior, $436B

* Tri-Party General Collateral Rate (TGCR): 2.22% vs. 2.25% prior, $413B

PIPELINE: Decent supply for slow day,

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

11/20  $1b *ADB 2Y MS -5

11/20  $750M *HSBC Bank Canada 3Y Covered MS +33

11/20  $1b Kommuninvest Long 3Y, IPT MS +7a

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

- Nov 21 16-Nov MBA Mortgage Applications (-3.2%, --) 0700ET

- Nov 21 17-Nov jobless claims (216k, 215k) 0830ET

- Nov 21 Oct durable goods new orders (0.8%, -2.5%) 0830ET

- Nov 21 Oct durable new orders ex transport (0.1%, 0.3%) 0830ET

- Nov 21 Nov Michigan sentiment index (f) (98.3, 98.3) 1000ET

- Nov 21 Oct existing home sales (5.15m, 5.18m) 1000ET

- Nov 21 Oct leading indicators (0.5%, 0.1%) 1000ET

- Nov 21 Q2 QCEW employment 1000ET

- Nov 21 16-Nov crude oil stocks ex. SPR w/w (1.03m bbl, --) 1030ET

- Nov 21 US Tsy $11B 10Y TIPS auction (912828Y38) 1130ET

- Nov 21 16-Nov natural gas stocks w/w (39.0Bcf, --) 1200ET

- Nov 21 14-Nov Fed weekly securities holdings 1630ET

Eurodollar/Treasury Option Summary

Eurodollar options, Pit/screen:

* 10,000 Short Dec 70/71 1x2 call sprd at 0.5

* appr 17,000 short Mar 63/65/66 put trees, 1/64 sold on screen

* 6,600 Dec 76 calls at CAB vs 9727.75/0.10%

* 3,000 Short Dec 68 puts at 4 vs 9694.5/0.34%

* 12,000 Short April 63/65/66 put tree at 1

* 7,000 Green Dec 67 puts at 1.5 vs 9695/0.18%

* 5,000 Mar 72/73/75 call fly at 1.5

* 10,000 Dec 73/75 2x3 call sprd at 1

* +13,000 Dec 73 calls at 1

* 10,000 Green Dec 66 puts at 0.5 vs 9696.5/0.10%

* +2,500 Blue Sep 80 calls, 5.0

* 34,000 Mar 72/73 1x2 call sprd at 0.5

* -10,000 Sep 73 calls at 1 over Sep 68/70 put sprd vs 9701/0.34%

* 12,000 Jun 68 puts at 4.5 vs 9706.5/0.20%

block, 09:30:53ET

* 10,000 Mar 72/73 call sprd over Mar 70 puts for net 1.25

* +3,500 Red Mar 62 puts at 4.5 vs 9695.5/0.12%

* -6,500 Short Dec 68 puts at 4 vs 9695/0.32%

* +10,000 Short Jan 66/67 put sprd at 2 vs 9695/0.11%

* -5,000 Short April 71/75 call sprd at 7.5

block, 08:04:02ET

* +7,500 Green Mar 70/72 2x3 call sprd vs 22,500 Green Mar 65 puts, call sprd

over, 1 net

block, 07:54:34ET

* 7,000 Short Dec 67/68 2x1 put sprd at 2

Tsy options, 

upside call buy interest gains momentum as probability of rate hike at Dec FOMC

moderates.

* +13,500 TYG 124.5/125 call strips, 4/64

* 5,500 FVZ 112.5/112.75/113 put flys, 6.5/64

* 7,500 FVG 112 puts, 12.5- to 12/64 vs. 112-27.2

* 3,000 TYZ 119/120 call spds, 4/64

driving volume in 5Y options is Way-OTM put buyer. Implieds steady/lower on

range.

* +150,000 FVH 103.75 puts, cab-7. Earlier:

* +8,500 FVF 111.75/112.5 put spds, 9.5/64 vs. 112-29.25

* 1,000 USF 140 calls vs. USG 143/144 call strip, even net

* -3,000 TYF 121 calls, 7/64

* appr 2,500 TYZ 120 comb

* -1,000 FVH 113 straddles, 11.75

* -4,000 TYF 119/119.5 strangles, 58/64

Large screen trade last minute

* near 75,000 TYZ 120 calls, 2/64 (open interest 225,291 coming into session)

OPTIONS: VIX still higher on day but has given up gains from midmorning

(currently +2.35, 22.45 vs. 23.81H). Skipping over decent Nov options activity

(expire tomorrow)

- Dec options are seeing decent/heavy volume as well 75,000 37.5 calls traded at

.5 earlier

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

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