US TSYS: GEOPOLITICAL RISKS JUST A ROCKET AWAY

US TSY SUMMARY: Geopol risk still very much a factor if retaliation for missile

strikes gain momentum. Tsys blipped higher in late trade after reports of rocket

attacks on US base Taji base in northern Iraq. Some 85k TYH traded on initial

move. 

- Some question over US/China trade tariff headline: "CHINA TARIFFS TO STAY

UNTIL AFTER U.S. ELECTION DESPITE DEAL" from Bbg added to rate bid. US had not

made any promise to remove all tariffs in order to make phase 1 deal. Early

session headlines also noted details of ph1 deal to be signed Wed in DC aren't

likely to be revealed. 

- On flows, sources reported prop and fast$ buying short end, real$ buying

intermediates to long end post data, misc accts buying 2s, bank sales 5s and

10s, decent rate and spd paying, deal-tied flow in 5s-10s; chunky buying in lead

Eurodlr quarterly futures EDH0 around 98.26.

- The 2-Yr yield is down 1bps at 1.5741%, 5-Yr is down 2.6bps at 1.6232%, 10-Yr

is down 3bps at 1.8161%, and 30-Yr is down 2.7bps at 2.275%.

TECHNICALS: 

US 10YR FUTURE TECHS: (H0) Consolidating But Still Bearish  

*RES 4: 130-17+ High Nov 1

*RES 3: 130-06   High Jan 8 and a key resistance 

*RES 2: 129-18   61.8% retracement of the Jan 8 - Jan 9 decline

*RES 1: 129-06+ High Jan 14

*PRICE: 129-04 @ 16:18 GMT, Jan 14

*SUP 1: 128-17+ Low Jan 97

*SUP 2: 128-05   Low Dec 30 and Low Jan 2

*SUP 3: 128-00   Low Dec 24

*SUP 4: 127-29   Low Dec 13 and key support 

10yr futures are slightly higher, but the moves are insufficient to nudge the

needle away from bearish territory. The sell-off last week on Jan 8 is still

seen weighing on sentiment. Price failed to remain above resistance at 129-21,

Jan 6 high and the 50-day EMA, an indicator used as a reliable trend signal.

Furthermore, last week's recovery on Thursday and Friday appears corrective. The

focus is on 128-05, Dec 30 / Jan 2 low where a break would open 127-29, Dec 13

low and key support. Resistance is 129-06+.

AUSSIE 10-YR TECHS: (H0) Near-term Top In? 

*RES 3: 98.8950 - High Dec 10 and 11

*RES 2: 98.8913 - 100-DMA

*RES 1: 98.8600 - High Jan 8

*PRICE: 98.7650 @ 16:11 GMT, Jan 14

*SUP 1: 98.5700 - Low Jan 2 

*SUP 2: 98.5348 - 1.236 projection of Dec 5 - Dec 13 decline from Dec 18 high

*SUP 3: 98.4976 - 1.382 projection of Dec 5 - Dec 13 decline from Dec 18 high

Markets saw a high print of 98.8600 last week on the back of the Iranian missile

retaliation, but these gains were rapidly pared into the close as tensions

swiftly de-escalated. This suggests the Wednesday high could mark a near-term

top, prompting bears to re-target the 98.5700 YTD low in the medium term should

the 200-dma at 98.7117 give way. This bearish cycle has been in place since Nov

28. The focus is on a move towards 98.5348 and 98.4976 next, both Fibonacci

projection levels.

JGB TECHS: (H0): Plays the Range

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

*RES 2: 153.11 - High Dec 4

*RES 1: 152.62 - High Jan 6

*PRICE: 151.92 @ 16:05 GMT, Jan 13

*SUP 1: 151.62 - Contract lows, Dec 20

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

*SUP 3: 150.54 - 1.0% lower 10-dma envelope

JGBs pressured the lower end of the 2020 range last week after an opening gap

higher was quickly reversed into the close. This leaves the outlook rather weak,

highlighting support at 151.62. A break of which could open 151.48 and 151.18,

the 0.764 and 1.00 Fibonacci projection levels of the decline between Dec 4 -

Dec 10 from the Dec 11 high. This all comes ahead of the 151.11 Fibonacci

retracement.

TSY FUTURES CLOSE: Well bid, see-sawing near session highs on improved volume

(TYH>1.2M), more of a risk-off react in rates to China tariff headlines than

reports of new rocket attack on US base in northern Iraq. Yld curves bull

flattening. Update:

* 3M10Y  -4.470, 24.507 (L: 23.82 / H: 30.204)

* 2Y10Y  -1.924, 23.828 (L: 23.45 / H: 26.398)

* 2Y30Y  -1.430, 69.889 (L: 69.34 / H: 72.235)

* 5Y30Y  -0.022, 65.014 (L: 64.509 / H: 66.295); Current futures levels:

* Mar 2-Yr futures up 0.75/32  at 107-23.375 (L: 107-22 / H: 107-24)

* Mar 5-Yr futures up 3.75/32  at 118-27.75 (L: 118-21.75 / H: 118-29.25)

* Mar 10-Yr futures up 7.5/32  at 129-5 (L: 128-25 / H: 129-07.5)

* Mar 30-Yr futures up 21/32  at 157-29 (L: 156-30 / H: 157-31)

* Mar Ultra futures up 34/32  at 185-3 (L: 183-17 / H: 185-07)

US EURODLR FUTURES: Mostly firmer after the bell, Greens-Golds upper half of

narrow range, Whites steady/mixed on decent volume after some chunky buying in

lead quarterly around 98.26. Latest levels:

* Mar 20 -0.005 to steady at 98.265

* Jun 20 steady at 98.325

* Sep 20 +0.005 at 98.40

* Dec 20 +0.005 at 98.410

* Red Pack (Mar 21-Dec 21) +0.010 to +0.015

* Green Pack (Mar 22-Dec 22) +0.020

* Blue Pack (Mar 23-Dec 23) +0.020 to +0.030

* Gold Pack (Mar 24-Dec 24) +0.025 to +0.030

US DOLLAR LIBOR: Latest settles

* O/N -0.0039 at 1.5312% (-0.0019/week)

* 1 Month -0.0066 to 1.6696% (-0.0070/wk)

* 3 Month +0.0114 to 1.8426% (+0.0049/wk)

* 6 Month -0.0080 to 1.8645% (-0.0076/wk)

* 1 Year +0.0011 to 1.9631% (-0.0035/wk)

US SWAPS: Spds running wider after the bell with 5s-30s leading the charge, 5Y

dis-inverting late as Tsy yld curves bull flatten. Decent rate and spd paying on

move, deal-tied flow in 5s-10s. Current levels:

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

Tue 1500    +0.50/+6.25    +0.88/+0.38   +1.00/-4.25    +1.00/-31.12

1300        +0.00/+5.75    +0.06/-0.44   +0.50/-4.75    +0.62/-31.50

1100        -0.12/+5.62    +0.06/-0.44   +0.44/-4.81    +0.38/-31.75

0915        +0.25/+6.00    +0.00/-0.50   +0.38/-4.88    +0.38/-31.75

Tue Open    +0.06/+5.81    -0.25/-0.75   -0.06/-5.31    -0.06/-32.21

Mon 1500    +0.06/+5.94    +0.06/-0.44   +0.19/-5.19    +0.25/-32.12

Mon Open    +0.38/+6.25    +0.00/-0.50   +0.12/-5.25    +0.00/-32.38

Monday recap: Spds holding mildly wider across the curve/narrow range amid

better payers in 1s-4s early migrating to intermediates, deal-tied selling in

3s, 5s and 7s.

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

* Daily Effective Fed Funds Rate: 1.54%, volume: $85B

* Daily Overnight Bank Funding Rate: 1.54%, volume: $190B

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

* Secured Overnight Financing Rate (SOFR): 1.54%, $1.021T

* Broad General Collateral Rate (BGCR): 1.52%, $389B

* Tri-Party General Collateral Rate (TGCR): 1.52%, $377B

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

15-Jan 0700 10-Jan MBA Mortgage Applications (13.5%, --)

15-Jan 0830 Dec Final Demand PPI (0.0%, 0.2%)

15-Jan 0830 Dec PPI ex. food and energy (-0.2%, 0.2%)

15-Jan 0830 Dec PPI ex. food, energy, trade (0.0%, 0.2%)

15-Jan 0830 Jan Empire Manufacturing Index (3.5, 3.6)

15-Jan 1030 10-Jan crude oil stocks ex. SPR w/w

15-Jan 1100 Philly Fed Harker, mon-pol normalization, Q&A

15-Jan 1100 SF Fed Daly, breakfast event, Q&A

15-Jan 1130 Tentative US/China phase 1 signing ceremony, DC

15-Jan 1200 Dallas Fed President Rob Kaplan, Q&A

15-Jan 1400 Fed releases Beige Book

PIPELINE: KFW priced, Guardian and NY Life launched, waiting for Macquarie Bank

details 

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

01/14 $5B *KFW 3Y +5

01/14 $3B *Govt of Canada 5Y +6

01/14 $1.25B *Prosus 10Y +185

01/14 $1.25B #Macquarie Bank 5Y +70

01/14 $1.25B #ANZ 10.5NC5.5 +133

01/14 $300M #Guardian Life Ins WNG 50Y +147

01/14 $650M #NY Life Global Funding 5Y +45

-- ADB in the que, expected to issue tomorrow:

01/15 $Benchmark ADB (Asia Development Bank) 3Y +6a, 10Y +8a

01/15 $Benchmark JBIC (Japan Bank for Int Cooperation) 3Y +31a

01/?? $Benchmark JFM (Japan Finance Org) roadshow

01/?? $Benchmark Bank Leumi Le-Israel 11NC6 roadshow

01/?? $Benchmark Credit Bank of Moscow 5Y roadshow

Eurodollar/Tsy options 

Eurodollar options:

* +8,000 short Aug 83/86 call over risk reversals, 1.5

* +3,000 Dec 83/88 1x3 call spds, 0.5

* -40,000 Jun 86 calls, 2.0 vs. 98.33/0.14% vs.

* +40,000 Dec 90 calls, 4.5 vs. 98.43/0.14%, 2.5 net micro flattener

* +10,000 short Mar 83/85/86 call flys, 3.5 -- ongoing buyer adds to +30k Blocks

* Update total +50,000 Dec 95/97 call spd 0.0 vs. -25,000 Dec 80/81 put spds

Block, 1149:07ET, adds to prior +20k Block

* +10,000 short Mar 83/85/86 call flys, 3.5 net

Block, 0952:30ET, ongoing buyer

* +20,000 short Mar 83/85/86 call flys, 3.5 net

* -10,000 Red Dec 97/100 1x2 callspds, cab

* -6,000 short Feb 87/88 1x2 call spds, cab

* +5,000 Mar 82/83 1x2 call spds, 1.0

* 3,000 Mar 82/83/85 call trees, 1.5

* 3,450 short Mar 83/85/86 call flys, 3.5

* 2,000 Feb 82 straddles, 4.0

* 2,000 Jun 83/85 call spds 0.5 over Jun 81/82 put spds

Earlier screen trade

* 3,000 Mar 81/82/83/85 call condors in addition to Mar 82/83 call spds

* +10,000 Feb/Mar 82/83 call spd spd, 1.0

Tsy options:

* +10,000 TYH 131 calls 7/64

* 3,000 TYG 127.5/128.5/129.5 2x3x1 put flys, 19/64

* 1,750 USH 157 puts, 1-1/64 vs. 157-24

* >-14,000 (pit/screen) wk3 TY 128.5 puts, 2/64 vs. 129-01.5

* -3,000 TYH 128/130 strangles, 29/64

* +1,000 TYG 129/129.5/130 call flys, 7/64

* +5,000 USH 153/156 put spds vs. USH 161 calls, 28/64 net vs. 156-31/0.39%

little earlier

* +7,000 (pit/screen) TYG 128/130 strangles, 5/64, covering after better selling

Mon

* +5,000 TYG 131/132 1x2 call spds, 1/64 post data

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

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