US TSYS HALVE LOSSES AFTER GOOD 30-YR REOPEN;EYE WED FOMC/HIKE

     US TSYS SUMMARY: Treasuries ended Tues lower but managed to trim losses in

half after a fairly strong $12B 30Y bond reopening auction. The auction stopped

through to a 2.804% rate, with good 61.9% indirects, and OK 9.03% directs,

leaving manageable 29.1% for dealers to mop up. 

- Tsys began NY weaker after overnight 2way flows, then receded on mild sales

after 0.4% Nov. PPI, 0.3% Core. Tsys sales/shorts into 30Y auction, and sales in

10Y; others sold 2Y, 3Y, 5Ys. Stronger US$/yen pressured Tsys, as did mainly

firmer US stocks. Light US corporate bond issuance arose & mild hedging. 

- Heavy exchg traded optn volume: pick-up in low delta call buying targeting

1H'18; large >35k Feb 5Y put over risk reversal bought. US swaps wider. 

- Heavy buying Mar'18 2Y futures buying short end (>50k TUH, 107-02.5 to-02.75)

spurred earlier modest curve steepen. Tsys post-auction steepener unwinds in

5/30Y, 2/30Y curve, and dip buying. 

- Eurodlr futrs: heavy spd sales, >-20k EDH8/EDH9, 0.400; >-15k EDZ8/EDH9,

0.055) 

- TSYS 3PM ET: 2Y 1.831%; 3Y 1.953%; 5Y 2.172%; 7Y 2.315%; 10Y 2.403%; 30Y

2.782%.

FED: Markets are fully expecting a rate hike from the Fed at this Wednesday's

policy announcement while early 2018 rate hike probability levels holding stable

(MNI PINCH):

* Dec 13 FOMC: 100%

* Jan 31 FOMC: 61.0% for hike after Dec annc

* Mar 21 FOMC: 69.7% for Dec hike/no-go at January annc

* May 2 FOMC: 46% for hike after Dec and March annc

* Jun 18 FOMC: 52.6% for hike after Dec and March annc, no-go at May FOMC

US TSY FUTURES CLOSE: Trading weaker across the curve but well off session lows,

risk-on consolidation post 30Y auction R/O, mild position squaring ahead Wed's

FOMC. Current futures levels: 

* Mar Ultra bonds down 6/32 at 166-18 (165-21L/167-00H) 

* Mar 30-yr Bond futures down 10/32 at 152-23 (152-05L/153-06H) 

* Mar 10-yr futures down 4/32 at 124-04.5 (124-00L/124-11H) 

* Mar 5-yr futures down 1.75/32 at 116-08 (116-05.75L/116-11H) 

* Mar 2-yr futures down .25/32 at 107-03.75 (107-02.25L/107-04.25H)

US EURODLR FUTURES CLOSE: Trading mildly lower across the strip after the bell,

off midday lows on light volume. Current White pack (Dec'17-Sep'18): 

* Dec'17 -0.012 at 98.387 

* Mar'18 -0.005 at 98.225 

* Jun'18 -0.010 at 98.070 

* Sep'18 -0.010 at 97.980 

* Red pack (Dec'18-Sep'19) -0.005-0.015 

* Green pack (Dec'19-Sep'20) -0.015-0.010 

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

* Gold pack (Dec'21-Sep'22) -0.015

US SWAPS: Spds running wider across the curve on narrow range. Quiet session

ahead Wed's FOMC. Earlier flow included 4s5s flattener ($89.7k DV01), $177.8k

4s5s10s fly -- receiving 5s and mild deal-tied flow. OTC and exchange traded vol

steady/mixed, gamma mildly higher. Latest spread levels:

* 2Y +0.31/19.62

* 5Y +0.06/6.25

* 10Y +0.06/+1.12

* 30Y +0.25/-19.50

US PIPELINE: High-grade corporate bond issuance for Tuesday:

-

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

12/12 $450M #Vornado Realty Baa2/BBB/BBB 7Y+125 C/DB/JPM/JEFF

12/12 $400M *ANZ Aa3/AA-/AA- 144a/RegS 2Y Fxd+45 ANZ/BAML/C

12/12 $250M *ANZ Aa3/AA-/AA- 144a/RegS 2Y FRN +3ml+25 ANZ/BAML/C

12/12 TBD Kor.Elec.Pwr Corp. Aaa2/AA/AA- 11/3 wk meetgs BAML/C/CA

12/12 TBD Lebanon delayed Eurobond from Nov., said MOF

12/12 TBD Israel Electric Baa2/BBB US meetings Oct.30-Nov3 JPM

12/12 TBD Hanjin Bank: Potentl US$ deal w/ KEXIM Guar? BNP/DAIWA/GS

01/02 BM Philippines Baa2/BBB/BBB- 1st week Jan bond? C/CS/DB/MS/SCB

12/12 TBD Quatar eyed $9B in international bonds; no time yet

12/12 BM Korea Southern Pwr Aa2/AA- 11/29-12/5 mtgs BNP/C/HSBC/UBS

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

- Dec 13 Final day of FOMC policy meeting in Washington

- Dec 13 08-Dec MBA Mortgage Applications (4.7%, --) 0700ET

- Dec 13 Nov CPI (0.1%, 0.4%) 0830ET

- Dec 13 Nov CPI Ex Food and Energy (0.2%, 0.2%) 0830ET

- Dec 13 08-Dec crude oil stocks ex. SPR w/w (-5.6M bbl, --) 1030ET

- Dec 13 FOMC monetary policy announcement, Washington 1400ET

- Dec 13 Fed Chair Yellen press conf, Washington 1430ET

Eurodollar/Treasury Option Summary

Eurodollar options, Pit/screen:

Blocks, 1419:15-:45ET,

* total 21,095 Dec 78 calls, 51.25 -- no futures

* +10,000 Red Dec'18 73/75 put spds, 1.5 vs. 97.86/0.05%

* +5,000 short Jan 77 puts, 2.5 vs. 97.825/0.20%

* 7,000 short Mar 76/77 3x2 put spds 3.0 over short Mar 81 calls

* -5,000 Blue Jun 70/80 call over risk reversals, 1.5

* +15,000 Red Sep'19 71/73 put spds, 5.5 vs. 97.71/0.10%

* -20,000 short Feb 83 calls 0.25 over 10,000 short Mar 81/82/83/85 call condors

* Update, +30,000 Feb 83/85 1x2 call spds, 0.5

* Update, total +17,500 short Mar 75/77/78 2x2x1 put flys, 2.0 w/

* Update, total +17,500 short Mar 76/77/78 put flys, 3.0

* +10,000 Mar 82/83 1x2 call spds, 1.75 (after +85k EDH 83/85 1x2 call spd

bought on screen)

* 10,000 short Dec 78/Green Dec 76 put spds, 1.5 vs. 97.885

* 5,000 short Jan 76/80 call over risk reversals, 0.5 s=vs. 97.815/0.10

* 10,000 short Mar 81/82/83 call trees, 0.5 vs. 20,000 Feb 83 calls, 0.5

* +5,000 Feb 83/85 1x2 call spds, 0.5

* 12,500 short Mar 75/77/78 2x2x1 put flys, 2.0

* 12,500 short Mar 76/77/78 put flys, 3.0

* -10,000 Green Dec 76/77 put spds, 6.0 vs. 97.68/0.44%

* +3,000 short Feb 75/76/77 2x3x1 put flys, 1.0

* Update, total +80,000 Mar 83/85 1x2 call spds on screen, 0.5 net

* +20,000 Dec 83 puts, 0.5 vs. 98.382/0.10%

* 15,000 Green Jan 73/75 2x1 put spds, 0.5

* -1,500 long Green Dec 77 straddles, 79.0

* +10,000 Mar 81/82 2x1 put spds vs. Jan 82/83 strangles, 0.0 net

* +10,000 Mar 81/82 2x1 put spds, 4.5

* 2,000 Feb 83/85 1x2 call spds vs. Feb 81 puts, cab net/puts over

* 1,500 long Blue Dec 77 straddles, 79.0

Screen flow into the open includes

* 25,000 Mar 83/85 1x2 call spds

* 19,000 Dec 83 puts, cab (5,250 Blocked earlier)

* 3,200 Apr 78 puts vs. May 77/78 put strip

Block, 0641:57ET,

* 5,000 Red Dec'18 73/76 put spds, 4.0 vs. 97.86/0.10%

Tsy options, Pit/screen:

* Update, over +45,000 FVG 115.5/117.25 put over risk reversals, 1.5- to 1/64,

15k on screen earlier

* +4,500 TYF 123.75 puts, 12/64 on screen

* -3,300 FVF 116.25/116.75 put spds, 23/64

* 24,000 FVG 115.5/117.25 put over risk reversals, 1.5- to 1/64, 15k on screen

* 2,595 FVG 115.25/117.25 strangles, 7.5/64

* 3,300 TYG 123.5/125.5 risk reversals, 2/64 calls over

* total 10,000 TUG 106.8/107 2x1 put spds, 2.5

* 4,000 TUG 106.8/107 2x1 put spds, 2.5

* 3,000 FVG 115.5/117.25 put over risk reversals, 1/64

* 4,000 FVF 117/117.5 call spds, 1/64

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

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