US TSYS: GETTING CLOSE TO A USMCA DEAL -- OR NOT?

US TSY SUMMARY: Generally quiet start to the week, Tsy futures Mostly bid by the

close but well off early highs, choppy second half trade tended toward selling

into bid on light volume (TYH<960k late). Second half focus on opposing USMCA

headlines, that a deal was near, denied by WH officials but talked up again by

Pres Trump a few minutes later. Mkts getting used to uncertainty showed little

react.

- Heavy Tsy option flow, outright OTM call buying, Jan/Feb rolling across the

curve. Two-way positioning ahead Wed's final FOMC rate annc for 2019.

- Swap spds running mostly wider by the bell, spd curve steeper all session vs.

flatter Tsy yld curves. Mild flow included receivers in 2s, light two-way in

intermediates, deal-tied selling in the mix.

- 3Y Note auction: Right on the screws, US Tsy $38B 3Y Note auction (912828YW4)

awarded 1.632% (1.630% previous) vs. 1.632% WI, bid/cover 2.56 vs. 2.60

previous.

- The 2-Yr yield is up 0.6bps at 1.6211%, 5-Yr is up 0bps at 1.6627%, 10-Yr is

down 0.9bps at 1.8277%, and 30-Yr is down 1.4bps at 2.2638%.

TECHNICALS

US 10YR FUTURE TECHS: (H0) Appears Vulnerable

*RES 4: 130-17+ High Nov 1 

*RES 3: 130-16   61.8% of the Oct 7 - Nov 7 decline

*RES 2: 130-04+ High Dec 3 and bull trigger

*RES 1: 129-14+ Friday's high

*PRICE: 129-00 @ 16:43 GMT, Dec 9

*SUP 1: 128-21   Low Dec 6 

*SUP 2: 128-14+ 76.4% retracement of the Nov 7 to Dec 3 rally

*SUP 3: 128-11+ Low Nov 13

*SUP 4: 128-03+ Low Nov 12

10yr futures traded lower Friday following the NFP release, hitting a fresh

weekly low at 128-21 before rebounding slightly. Importantly, this led to a

break of former support at 128-23+, Dec 2 low and largely negates the upside

seen during the early part of last week. This has exposed 128-14+, 76.4%

retracement of the Nov 7 to Dec 3 rally. A break would open 128-11+ and 128-03+,

Nov 13 and Nov 12 lows respectively. Resistance is at 129-14+, Friday's high.

AUSSIE 3-YR TECHS: (Z9) Plays the Range

*RES 4: 99.472 - 123.6% Projection

*RES 3: 99.460 - Alltime High Oct 7 

*RES 2: 99.421 - 3.0% Upper Bollinger Band

*RES 1: 99.395 - High Nov 27

*PRICE: 99.295 @ 16:44 GMT Dec 9

*SUP 1: 99.165 - Low Nov 13

*SUP 2: 99.130 - Low Nov 12

*SUP 3: 99.070 - Low Nov 8 and key support

*SUP 4: 99.055 - 1.00 projection of Oct 8 - Oct 22 decline from Oct 25 high

After a drubbing early last week, Aussie 3-year bonds have played the range,

providing few fresh technical signals. Focus remains on the recent lows as the

recent run-up to 99.395 now looks to be over. Prices continue to trade either

side of the 99.30 level at present, denting the outlook materially. 99.165 seen

as the next key support. 

AUSSIE 10-YR TECHS: (Z9) Looking More Stable

*RES 3: 99.0358 - 76.4% retracement of the Oct 8 - Nov 11 decline

*RES 2: 99.0150 - High Nov 28 / 2.0% Upper Bollinger Band

*RES 1: 98.9700 - High Dec 5

*PRICE: 98.8650 @ 16:47 GMT, Dec 9

*SUP 1: 98.7679 - Former channel resistance 

*SUP 2: 98.6850 - Low Nov 13

*SUP 3: 98.6500 - Low Nov 8 and primary support

Aussie 10yr futures bounced well mid last week after early weakness, which

largely held throughout the Wednesday/Thursday sessions. This has given bears

some pause for thought as prices look slightly more stable. It still looks too

soon to call for an extension of the recent recovery. Nonetheless, prices show

little sign of retreating much further with former channel

resistance-turned-support at 98.7679 holding for now. Momentum will be needed

before the outlook turns convincingly positive, with bulls needing to reclaim

99.0150.

JGB TECHS: (Z9): Strikes a New Contract Low

*RES 3: 154.31 - 1.0% 10-dma envelope

*RES 2: 153.93 - High Nov 6

*RES 1: 153.64 - High Nov 21

*PRICE: 152.31 @ 16:50 GMT, Dec 9

*SUP 1: 152.23 - 2.0% Lower Bollinger Band

*SUP 2: 152.18 - Contract Lows

*SUP 3: 151.26 - 1.0% 10-dma envelope

JGBs rode the tide of the midweek bounce in global bond markets but faded into

the weekly close, placing recent support lines under pressure and showing at new

contract lows of 152.18. The relevance of these levels for the Dec (Z9) contract

can be called into question, however, with focus now on the roll completion

headed into the new year. For bulls to regain any composure, markets must top

the Nov 6 high at 153.93.

US TSY FUTURES CLOSE: Mostly bid by the close but well off early highs, choppy

second half trade tended toward selling into bid on light volume (TYH<960k

late). Yld curves flatter but off lows. Update:

* 3M10Y  -2.396, 28.44 (L: 27.838 / H: 31.356)

* 2Y10Y  -1.488, 20.252 (L: 19.154 / H: 22.087)

* 2Y30Y  -1.834, 64.01 (L: 62.895 / H: 66.428)

* 5Y30Y  -1.385, 59.93 (L: 59.386 / H: 61.694)

Current futures levels:

* Mar 2-Yr futures down 0.125/32 at 107-22.875 (L: 107-22.5 / H: 107-24.125)

* Mar 5-Yr futures up 1/32 at 118-22.25 (L: 118-21 / H: 118-25.75)

* Mar 10-Yr futures up 3/32 at 128-31.5 (L: 128-27 / H: 129-05.5)

* Mar 30-Yr futures up 10/32 at 157-30 (L: 157-18 / H: 158-13)

* Mar Ultra futures up 21/32 at 185-18 (L: 184-25 / H: 186-10)

US EURODLR FUTURES CLOSE: After trading with decent bid in first half, futures

recede to steady/mixed in late trade, low end of session range. Current White

pack (Dec 19-Sep 20):

* Dec 19 +0.005 at 98.115

* Mar 20 +0.005 at 98.295

* Jun 20 +0.005 at 98.380

* Sep 20 steady at 98.440

* Red Pack (Dec 20-Sep 21) steady

* Green Pack (Dec 21-Sep 22) -0.005 to steady

* Blue Pack (Dec 22-Sep 23) steady to +0.005

* Gold Pack (Dec 23-Sep 24) +0.005 to +0.010

US SWAPS: Spds running mostly wider by the bell, spd curve steeper all session

vs. flatter Tsy yld curves. Mild flow included receivers in 2s, light two-way in

intermediates, deal-tied selling in the mix. Current levels:

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

Mon 1500    -0.50/+1.19    +0.12/-2.75   +0.25/-6.75    +0.12/-32.62

1345        -0.62/+1.06    +0.06/-2.81   +0.12/-6.88    +0.06/-32.69

1100        -0.12/+1.56    +0.19/-2.69   +0.38/-6.62    +0.44/-32.31

0930        -0.31/+1.38    +0.12/-2.75   +0.31/-6.69    +0.31/-32.44

Mon Open    -0.69/+1.00    -0.25/-3.12   +0.00/-7.00    +0.00/-32.75

Mon 0745    -0.56/+1.12    -0.38/-3.25   +0.00/-7.00    -0.19/-32.94

Fri 1500    +0.12/+1.94    +0.06/-2.81   +0.06/-6.94    +0.50/-32.75

US DOLLAR LIBOR: Latest settles

* O/N +0.0075 at 1.5366% (-0.0134 last wk)

* 1 Month +0.0025 to 1.7176% (+0.0179 last wk)

* 3 Month -0.0021 to 1.8884% (-0.0150 last wk)

* 6 Month -0.0066 to 1.8801% (-0.0098 last wk)

* 1 Year +0.0121 to 1.9353% (-0.0295 last wk) 

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

* Daily Effective Fed Funds Rate: 1.55%, volume: $76B

* Daily Overnight Bank Funding Rate: 1.55%, volume: $160B

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

* Secured Overnight Financing Rate (SOFR): 1.55%, $1.017T

* Broad General Collateral Rate (BGCR): 1.52%, $401B

* Tri-Party General Collateral Rate (TGCR): 1.52%, $385B

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

10-Dec FOMC policy meeting kicks off

10-Dec 0600 Nov NFIB Small Business Index (102.4, 103)

10-Dec 0830 Q3 non-farm productivity (f) (-0.3%, -0.1%)

10-Dec 0830 Q3 unit labor costs (f) (3.6%, 3.4%)

10-Dec 0855 07-Dec Redbook retail sales m/m (0.4%, --)

10 Dec 1300 US Tsy $24B 10Y Note (912828YS3) auction

PIPELINE: Quest Diagnostics launched

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

12/09 $1B #Steel Dynamics $400M 5Y +115, $600M 10Y +165

12/09 $800M #Quest Diagnostics +10Y +115

12/09 $500M #Welltower WNG 7Y +95

12/09 $400M Credit Acceptance Corp 5NC2 

Canadian issuance

12/09 C$500M *British Colombia 10Y +62.5

Eurodollar/Tsy options: 

Eurodollar Options

* -7,500 Green Dec 83/85 strangles, 4.5

* -5,000 Mar 83 puts, 12.5 vs. 98.285/0.50%

* -2,500 short Mar 85 straddles, 26.0

* +3,000 Jun 81.82.83 2x3x1 put flys, 1.5

* -4,000 Mar 80/81/82 put flys, 2.5

* 2,000 Mar 85/90 call strips, 2.5

* Update, over +8,750 Mar 82/83/85 call flys, 7.75

* +7,500 (pit/screen) Mar 82/83/85 call flys, 1.75

* +3,000 Mar 83/85/86 call flys, 1.25

* -2,500 Jun 81/88 call over risk reversals, 1.0 vs. 98.385/0.27%

* -5,000 Apr 82/83 put spds, 6.25

* +4,000 Jun 85/86 call spds, 2.75 

* 1,000 Jun 80 puts, 1.0 vs. 98.33

Tsy options:

5s10s curve flattener

* -8,000 FVG 119.75 calls, 10/64 vs. 118-23/0.20% vs.

* +4,000 TYG 130.5 calls, 22/64 vs. 129-01/0.24%

More large screen trades

* -22,700 TYG 131.5 calls, 11/64

* +26,400 TYF 130.25 calls, 9/64

* 2,000 TYF 129.5/TYG 131.5 1x2 call spds, 0.0

* 1,300 TYF 128/129 2x1 put spds, 3/64

* Update, near +20,000 FVF/FVG 119.5 call spds, 9/64 on screen -- adds to some

31k bought Fri from 8-8.5

Other large calendar spds traded Friday:

* +100,000 TYF/TYG 130 call spds, 14-15

* +17,000 USF/USG 161 call spds, 29-33

* +6,000 FVF/FVG 119.5 call spds, 9/64 on screen, sizing offers in pit, getting

11/64 in return

* 2,000 TYF 129/130.5/131 call trees, 27/64 vs. 129-04.5/0.30% earlier

* +8,748 TYF/TYG 130 call spds on screen, 17/64

* Update, screen total +40,191 TYF 131 calls, 4/64

* +36,000 TYF 131 calls, 4/64 on screen

* 2,500 USG 147/151 2x1 put spds, 3/64

* -2,000 TYG 127/130 strangles, 38/64

* 1,000 TYF 129 puts, 31- to 33/64

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

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