US TSYS: HEAVY SELLING ON JAN CPI GAIN .5%, INFL EXP ON RISE

US TSYS SUMMARY: Mkts discounted retail sales miss (-.3% vs. +.2% exp), focused

on strong CPI gain (0.5% vs. .3% exp), dealers down-revise Q1 GDP est's, up rate

hike calls. Equities rebounded and holding gains (emini +11.0, 2672.75), while

10Y yld tapped new 4-year high of 2.9168%. 

- US$ index still soft (DXY -.619, 89.084); gold strong (XAU +24.79, 1354.42);

West Texas crude little bounced (WTI +1.59, 60.78).

- Heavy flow included real$ sales, fast$ covers, off-the-run sales. 

- Tsys traded higher overnight, ally extended as US$ continued to recede vs. Yen

(off 16.84 low to 107.37, Nov 2016 lows) following lower than est Japan GDP

(+.1% Q/Q, +.5% ann). Tsys pared gains as US$ bounced into the London crossover.

Tsys sold off sharply post data,curves mixed with 10s and 5s underperforming.

- Heavy front end Eurodollar sales in Whites-Reds (EDH8-EDZ9) as data increases

inflation metrics and tighter policy expectations, heavy low delta put buying

after moderate unwinds earlier in week, some profit taking selling as well.

Implied vol choppy, receding on rebounds in underlying

- Late ylds: 2Y 2.172%, 3Y 2.399%, 5Y 2.647%, 7Y 2.841%, 10Y 2.917%, 30Y 3.181%

US TSY FUTURES CLOSE: At/near session lows by the close on heavy post data

selling (TYH>2.28M), 10Y yld tapped new 4-year high of 2.9168%. Latest curve

update:

* 2s10s +1.567, 73.902 (74.630H/70.415L);

* 2s30s -0.149, 100.352 (101.413H/96.396L);

* 5s30s -3.536, 53.222 (57.340H/51.056L);

Current futures levels:

* Mar Ultra bonds down 1-16/32 at 155-09 (155-09L/157-27H)

* Mar 30-yr Bond futures down 1-8/32 at 143-10 (143-09L/145-09H)

* Mar 10-yr futures down 22/32 at 120-10 (120-09L/121-07.5H)

* Mar 5-yr futures down 14.75/32 at 114-05.75 (114-05.25L/114-24.75H)

* Mar 2-yr futures down 4.75/32 at 106-16.5 (106-16.5/106-22.5H)

US EURODOLLAR FUTURES CLOSE: Broadly lower across the strip, at/near session

lows w/Reds-Greens underperforming. Heavy front end selling post data as rates

adjust to increased rate hike expectations. Current White pack (Mar'18-Dec'18):

* Mar'18 -0.040 at 97.995

* Jun'18 -0.055 at 97.800

* Sep'18 -0.080 at 97.665

* Dec'18 -0.085 at 97.535

* Red pack (Mar'19-Dec'19) -0.100-0.120

* Green pack (Mar'20-Dec'20) -0.115-0.110

* Blue pack (Mar'21-Dec'21) -0.105-0.095

* Gold pack (Mar'22-Dec'22) -0.090-0.080

US SWAPS: US SWAPS: Spds running wider by the bell,wings outpacing

intermediates, modest  

rebound from Tue's narrowing. Decent flow on the day: $296.2k 2Y-5Y-10Y Fly,    

receiving the belly; $296.2k 2Y-7Y-10Y Fly, receiving the belly; $363.4k        

5Y-10Y-20Y Fly, receiving the belly; $478k 2Y-20Y-30Y Fly, paying the belly;    

478k 8Y-10Y-30Y Fly, paying the belly                                           

Outrights and curve flow:                                                       

* $380mln payer of USD 2Y at 2.41493%                                           

* $62.4k DV01 2Y-5Y STEEPENER. Early flow included rate paying in 5s at         

2.64138%, bank receiving in intermediates. Latest spread levels:                

* 2Y  +1.81/27.12                                                               

* 5Y  +0.38/9.62                                                                

* 10Y +0.39/1.38                                                                

* 30Y +1.38/-16.50 

PIPELINE: $2B *Rentenbank 2Y MS -4, Upsized and Priced

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

02/14 $2B *Rentenbank 2Y MS -3a

02/14 $Benchmark, General Dynamics CSRA deal

Priced Tuesday

02/13 $1.5B *KFW 21M Global MS -5

02/13 $500M *NWB 2/2020 FRN 3ML +4 

Potential upcoming issuance in the near term:

Chatter, 3M (MMM) A1/AA-

Chatter, Bank of New Zealand (BZLNZ) A1/AA-

Chatter, KeyBank 

Chatter, Fifth Third Bank (FITB) A3/A

Chatter, State Street Corp (STT) A1/A

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

- Feb 15 10-Feb jobless claims (221k, 228k) 0830ET 

- Feb 15 Jan Final Demand PPI (-0.1%, 0.4%) 0830ET

- Feb 15 Jan PPI ex. food and energy (-0.1%, 0.2%) 0830ET

- Feb 15 Jan PPI ex. food, energy, trade (0.1%, --) 0830ET

- Feb 15 Feb Empire Manufacturing Index (17.7, 17.9) 0830ET

- Feb 15 Feb Philadelphia Fed Mfg Index (22.2, 21.3) 0830ET

- Feb 15 Jan industrial production (0.9%, 0.2%) 0915ET

- Feb 15 Jan capacity utilization (77.9%, 78.0%) 0915ET

- Feb 15 11-Feb Bloomberg comfort index 0945ET

- Feb 15 Feb NAHB home builder index (72, --) 1000ET

- Feb 15 09-Feb natural gas stocks w/w (-119Bcf, --) 1030ET

- Feb 15 US Tsy $7B 30Y TIPS auction 1300ET

- Feb 15 Dec net TICS flows 1600ET

- Feb 15 Dec long term TICS 1600ET

- Feb 15 14-Feb Fed weekly securities holdings 1630ET

Eurodollar/Treasury Option Summary

Eurodollar options, Pit/screen:

* +10,000 Blue Jun 66 puts 5.5 over the short Jun 71 puts covered

* 13,000 Jun 80/81 1x2 call spds, 0.0 net adds to recent 17k Block

* +5,000 Green Jun 6667 put strip, 7.5

* 5,000 Mar 80/Jun 77 straddle spds, 5.5

Block, 1400:30,

* 17,000 Jun 80/81 1x2 call spds, 0.0 net

Block, 1327:53, adds to -20k in pit at 9.0-9.5

* -20,000 Jun 77 calls, 9.0

Block, 1229:36ET, adds to 20k Blocked earlier

* 20,000 Red Mar'19 72 puts, 8.5 vs. 97.47/0.10%

Block, 1105:07ET

* 31,250 Red Mar'19 71 puts, 4.0

* 25,000 Red Mar'19 73 puts, 12.0

* 25,000 Red Mar'19 80 calls, 3.5

* +20,000 Mar 81/82 3x2 put spds, 9.5

* +15,000 Dec 77/78/80 put flys, 1.0

* 5,000 Dec 72/75 put spds, 8.0

* 5,000 short Dec 70/72 put spds, 11.0

Block, 0958:19ET

* +20,000 Red Mar'19 72 puts, 8.5 vs. 97.455/0.06%

* +19,000 Red Dec'19 65/67 put spds, 5.0

* +15,000 Red Mar'19 70/72 put spds,

* +10,000 Jun 80/82 call spds vs. short Jun 80 calls, 0.0, adds to screen

* -9,600 Green Apr 67/70 vs. +4,800 Blue Dec 66/67 call spds, 5.0 net

* 7,500 Dec 77/78/80 put flys, 1.0

More Sep 75/76 put spds buying at 4.5 (total over +165k)

* BLOCK +40,000 Sep 75/76 put spds, 4.5 at 0915:45ET

Block, 0853-0854ET, adds to 100k in pit

* +20,000 Sep 75/76 put spds, 4.5

In pit soon after

* +20,000 Jul 75/76 put spds 1.5 over Jul 80 calls vs. 97.71/0.30%

* Update, total +100,000 Sep 75/76 put spds, 4.0-4.5

* -5,000 Jun 76/77 put spds, 2.25

* 8,500 short Apr 78/short Jun 81 call spds, 2.5 vs. 98.415

* -2,000 Jun 76/77/78 put flys, 1.0

* +30,000 Sep 75/76 put spds, 4.0Pre-data

* -2,000 Dec 72/75 put spds vs. short Dec 70/72 put spds, 3.0 net

Highlight screen trade heading into the open

* 10,000 Jun 80/82 call spds vs. short Jun 80 calls

* 10,000 Jun 81 calls, 1.25

* 9,000 Mar 80 puts, 2.25

* 19,200 Green Apr 77/80 call spds

* 4,500 Green May 73/76 1x2 call spds

* 10,000 Green Feb 75 calls

* 9,000 short Apr 72 puts

Tsy options, Pit/screen:

* -8,600 TYJ 119 puts, 26/64

* total over -20,000 TYH 120/121 put spds, 30/64

* over 2,000 FVK 114 straddles, 1-6- to 1-6.5/64

* 2,000 TYJ 118/119.5 put spds, 24/64 vs. 120-19/0.25%

* 1,000 USH 145 calls, 37/64 vs. 144-10/0.38%

* Update, total -14,000 TYH 120/121 put spds, 30/64

* 2,000 TYH 121.7/122 call strip, 7/64

* +1,700 TYJ 117.5/118.5/119.5 put flys, 10/64 vs. 120-19.5/0.10%

* 1,000 FVM 115.5/117 1x2 call spds, 2/64

* +10,000 TYJ 122.5 calls, 8/64 vs. 120-21/0.10%

* 2,000 TYH 120.75 puts, 18/64

* 1,000 TYH 120.25/121 put over risk reversals 1/64 vs. 120-20

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

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