US TSYS HIGHER: FOMC UPS RATE 0.25% TO 1.25%-1.5%;YELLEN CALMS

     US TSYS SUMMARY: US Tsys ended higher Wednesday, portions of curve steeper

(5s30s +1.817, 62.089) or off early flats after FOMC voted 7-2 to tighten US Fed

Funds rate 25bp to 1.25%-1.50%; expects labor markets "will remain strong':

cited "solid" jobs gain. 

- Tsys gained after FOMC amid 2way flow: initial buys/short-cvr then mild

profit-taking, then more buying. Tsys began NY lower, rebounded on tame 0.1%

Core CPI, basically ignoring Nov CPI +0.4%. US$ weak, aiding Tsys earlier. 

- Curves flatten in morning, early afternoon, post-FOMC steepeners; 2way out

curve early afternoon. FX-tied buys in morning as US$/yen lower, fast-, real$

buyers in Tsy 10s and 30s, banks buying 30s. Other sellers of cash 5s and 10s 

- US Tsy futures: 1448-1449ET +10k FVH 116-14.25-15.25; large 1430ET Tsy futures

steepener block buy 11,600 FVH 5Y Futures buy-thru at 116-13.25/sell-thru of

2,000 WNH at 167-15. Early heavy front end Eurodollar futures selling (EDZ7,

EDH8). Late block buy: 2:58pm ET of 12,000 TUH 2Y Tsy futures at 107-06.5. AP:

Hse, Sen agreed in principle on tax pact, flr vote next wk. 

- 3PM ET: 2Y 1.786%, 3Y 1.899%, 5Y 2.112%, 7Y 2.257%, 10Y 2.351%, 30Y 2.737%.

FED: FOMC raised the funds rate to 1.25% to 1.50% on 7-2 vote. Evans and

Kashkari dissented, wanting no rate hike. 

- There was little change in the statement and the dots suggest three hikes in

2018 

- The median expectation for rates at the end of each year were unchanged for

2018 (2.1%) and 2019 (2.7%), but the outlook for 2019 was bumped up to 3.1% from

2.9%. It was unchanged at 2.8% for the long run. 

- The FOMC still expects "gradual increase" in the funds rate and risks remain

"roughly balanced" 

- The economic projections show bumped up expectations for GDP in 2018, with a

lower unemployment rate (3.9%) expected for 2018 and 2019, and for 2020 (4.0%).

Core PCE inflation expectations were unchanged.

US TSY FUTURES CLOSE: Broadly higher, long end off initial knee-jerk highs post

FOMC annc while front end surges in aftermath of Fed Yellen presser amid curve

flattener unwinds. Current futures levels: 

* Mar Ultra bonds up 1-08/32 at 167-22 (165-31L/167-31H) 

* Mar 30-yr Bond futures up 30/32 at 153-19 (152-09L/153-25H) 

* Mar 10-yr futures up 13.5/32 at 124-17.5 (123-29L/124-20H) 

* Mar 5-yr futures up 9.25/32 at 116-17 (116-03.25L/116-18.25H) 

* Mar 2-yr futures up 3.25/32 at 107-06.75 (107-02L/107-07H)

US EURODLR FUTURES CLOSE: Mostly higher by the bell, soon to expire front EDZ7

contract lower while balance of strip trades higher, Blues-Golds higher. Current

White pack (Dec'17-Sep'18): 

* Dec'17 -0.007 at 98.380 

* Mar'18 +0.025 at 98.245 

* Jun'18 +0.025 at 98.095 

* Sep'18 +0.035 at 98.015 

* Red pack (Dec'18-Sep'19) +0.040-0.050 

* Green pack (Dec'19-Sep'20) +0.050-0.055 

* Blue pack (Dec'20-Sep'21) +0.055-0.065 

* Gold pack (Dec'21-Sep'22) +0.065

US SWAPS: Spds running mixed after the close, spd curve flatter vs. post FOMC

steepening in Tsys. Spds had narrowed across the curve amid prop and bank

portfolio rate receiving in 2s-10s earlier; midmorning 5s7s8s and 5s7s10s spd

flys, 2-way spd curve flow in short end. Late curve unwinds, little deal-tied

hedging. OTC and exchange traded option vols crater post FOMC, eyes on packin

operations up heading into year end holidays now. Latest spread levels: 

* 2Y +0.88/20.62 

* 5Y +0.25/6.38 

* 10Y -0.38/+0.19 

* 30Y -0.62/-20.00

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

- Dec 14 09-Dec jobless claims (236K, 239K) 0830ET

- Dec 14 Nov retail sales (0.2%, 0.3%) 0830ET

- Dec 14 Nov retail sales ex. motor vehicle (0.1%, 0.7%) 0830ET

- Dec 14 Nov retail sales ex. mtr veh, gas (0.3%, --) 0830ET

- Dec 14 Nov imports price index (0.2%, 0.8%) 0830ET

- Dec 14 Nov exports price index (0.0%, --) 0830ET

- Dec 14 Dec Markit Services Index (flash) (54.5, --) 0945ET

- Dec 14 Dec Markit Mfg Index (flash) (53.9, --) 0945ET

- Dec 14 10-Dec Bloomberg comfort index (52.3, --) 0945ET

- Dec 14 Oct business inventories (0.0%, -0.1%) 1000ET

- Dec 14 08-Dec natural gas stocks w/w 1030ET

- Dec 14 13-Dec Fed weekly securities holdings 1630ET

Eurodollar/Treasury Option Summary

Eurodollar options, Pit/screen:

* -15,000 Green Feb 73 puts, 0.5 vs. 97.735/0.10%

* 5,000 Green Dec 75/76/77 put flys, 3.5

* -4,000 Gold Dec 75 puts, 1.0 vs. 97.545

* More short Dec 78 put sellers 1.0 in pit, adding to -131k on screen (includes

blocks)

* -10,000 Jun 82 puts, 20.0

* +3,000 short Mar 78 straddles, 18.5

* -2,500 Jun 80/81 strangles, 10.5

* Update, total -7,500 Green Dec 77/78/80 put trees, 9.5 vs. 97.74/0.52% w/

* total -7,500 Blue Dec 76/77/78 put trees, 9.5 vs. 97.65/0.30%, 19.0 total cr

Block, 1104:30ET, adds to huge pit volume on trade -- remains well offered

* +10,000 Feb/Mar 81 put spds 0.5 (Feb over) adds to 110,000 in pit

* +5,000 Mar 82/83/85 call flys, 2.25 vs. 98.225/0.18%

* 3,000 short Jun 75/77 put flys, 7.5 vs.

* 3,000 Green Jun 73/76 2x1 put spds, 2.0

* short Dec 78 puts volume up to 128,660 at 1.0 (45k Blocked earlier)

* -10,000 Jun 80 puts, 20.0 earlier

* Update, over +20,000 Mar 82/83 1x2 call spds, 2.

Block, 0928:37ET

* 20,000 short Dec 78 puts, 1.0, adds to prior block and high screen volume,

total volume just over 104,000 at moment. Reminder, Dec futures & options expire

Friday.

Block, 0909ET

* +10,000 short Jun 72/75 put spds, 3.0

* 5,000 Mar 82 puts, 6.0

* 3,700 Mar 82/83/85 1x3x2 call flys, 1.5 net

* 2,000 Gold Dec 75 straddles, 6.5

* 10,000 short Dec 78 puts, 1.0, total volume 72,500 (25k Blocked earlier)

Block, 0833:35ET

* +25,000 short Dec 78 puts, 1.0, still offered

Block, 0831:09ET

* -22,000 Green Dec 77 puts, 4.0, hit bid post data, currently 3.5 offer

* 8,000 short Dec 78 straddles, 5.5

* 2,000 Green Dec 75/76 put spds, 1.0

* 2,000 Blue Dec 76 calls, 2.0 vs. 97.595

* 115,000 Dec 83 puts, 0.5 -- adds to 5k Block -- ongoing closer ahead Fri's Dec

options/futures expiration (OI -27,170 after 53,594 trade Tuesday).

* myriad smaller 1-, 2- and 3Y Dec midcurve trades as well

Block, 0645:10ET,

* 10,500 short Dec 77 puts, cab

Block, 0714:16ET,

* 5,000 Dec 83 puts, 0.5, ongoing closer ahead Fri's Dec options/futures

expiration (OI -27,170 after 53,594 trade Tuesday)

Tsy options, Pit/screen:

* 4,500 TUG 107/TUH 107.1 2x1 put spds, 2.5

* 1,000 TYG 128/129/130 1x3x2 call flys, 0.0 net

* +3,000 FVG 116/117 strangles, 19.5 -- minority buyer of vol on the session

* +5,000 wk5 TY 123/123.75 call spds, 9/64

* 2,000 USG 154 calls, 1-7/64 vs. 153-05/0.42% earlier

Block, 1041:30ET, combo repeats smaller trade in pit

* -10,500 TYH 122.5/126 put over risk reversals, 1/64 net -- no cover reported

on 0.37% delta package

Block, 0951:25ET

* 7,500 TYF 124.75 calls, 8/64 after earlier block of 7.5k TYF 124.25 call

* -1,750 FVG 116/116.75 strangles, 22.5/64

* -1,000 USG 152/155 strangles, 1-47/64

* +2,500 USG 154 calls, 1-8/64 vs. 153-05

* 7,000 TYF 123 puts, 1/64

* 1,000 TYF 121/122/123 2x3x1 put flys, 1/64 net/wings over

* +10,000 FVF 116.5 calls, 9/64

* 2,100 TYG 123/125.5 strangles, 21/64

* 4,750 TYF 124.5/125 1x2 call spds, 3/64

* 1,000 wk1 TY 124.7/125.7 1x2 call spds, 8/64

Block, 0835:29ET

* +7,500 TYF 124.75 calls, 10/64, bought offer at time of post, bid briefly but

offered again as underlying trims post data gains

Block, 0752:55ET, still well offered

* +7,500 TYF 124.25 calls, 14/64

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

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