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Free AccessUS 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$]
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of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.