US TSYS HURT LATE BY FED CHAIR TAYLOR SPECULATION, 10-YR TECHS

     US TSYS SUMMARY: Treasuries ended Tuesday lower, as cash 10-year note tried

to hold key 2.40% level into the 3pm ET futures close, as was around 2.408% at

3pm ET, then yield rose back into the 2.415% area by 3:30pm ET  amid speculation

that Fed Chair nominee Taylor might be the front-runner.

- Tsys tried to improve midmorning briefly on equity softness on US Pres.

Trump/Corker tiff. But US stocks march up on good earnings, etc. US House was

set to vote Thurs on Senate-approved budget resolutn; US Sen Maj Leader Mitch

McConnell said all on same page for tax effort (Bloomberg); Hse Ways & Means

Chair Brady said tax bill cld be released Nov.1 if budget passed this week. 

- Tsys pressured by softer EGBS, stronger European PMIs, selling as US 10Y yld

rose over 2.4%. Eurodlr options:global macro super-size big put spds in pit

(150K EDZ 80/31 sprds vs. +75K each EDM 78/81 and EDU 77/80 sprds; acct rolls

out,down massive existing positn: bets futrs underestimate 2018 hikes. Rather

soft $26B 2Y auctn. 

- Tsys dipped late Tues afternoon: US Sen. Scott cited on BBG saying Taylor won

GOP Sen straw poll when asked by Trump, who talked up Taylor, Powell, Yellen so

not sure sign. 

- TSYS 3pm ET: 2Y 1.577%, 3Y 1.714%, 5Y 2.027%, 7Y 2.245%, 10Y 2.408%, 30Y

2.923%

US TSYS/2Y: Treasury had a mixed/so-so $26B 2Y note auction, which drew a 1.596%

rate and moderately good 48.2% indirects, in-range 14.2% directs (vs Sept

19.04%, Aug. 12.56%), leaving in-range 37.7% for dealers; soft 2.74 bid/cover.

US TSY FUTURES CLOSE: *** Fast break in Tsys around the closing bell app 100k

TYZ sold from 124-23.5 to -18 -- and right back to 124-23 last. Looks like algos

keyed into Taylor's name, increased % of being appointed Fed chair (even if just

chatter) spurs sell-off. Minutes after the "Taylor" chatter PredictiIt % shows

Powell chances drop from 60% to 52%, Taylor up to 24% from 16%. Current futures

levels: 

* Dec Ultra bonds down 1-1/32 at 163-07 (162-29L/164-17H) 

* Dec 30-yr Bond futures down 25/32 at 151-18 (151-12L/152-17H) 

* Dec 10-yr futures down 8.5/32 at 124-21 (124-18L/125-00.5H) 

* Dec 5-yr futures down 4.25/32 at 117-01.5 (116-31.75L/117-07.25H) 

* Dec 2-yr futures down .75/32 at 107-22 (107-21.25L/107-23H)

US EURODLR FUTURES CLOSE: Weaker across the strip, near session lows with long

end underperforming. Current White pack (Dec'17-Sep'18): 

* Dec'17 -0.005 at 98.490 

* Mar'18 -0.005 at 98.355 

* Jun'18 -0.010 at 98.240 

* Sep'18 -0.015 at 98.150 

* Red pack (Dec'18-Sep'19) -0.015-0.025 

* Green pack (Dec'19-Sep'20) -0.025-0.035 

* Blue pack (Dec'20-Sep'21) -0.040-0.045 

* Gold pack (Dec'21-Sep'22) -0.045-0.050

US SWAPS: Spds mildly wider across the curve, top end of range, spd curve

steeper. Sporadic flow includes better rate and spd paying from fast$ and props,

modest deal-tied flow, spd curve steepeners and long end wideners as seasonal

supply winds down. OTC vol directionally higher w/Tsy ylds, 1M10Y seeing late

bid. Heavy exchange traded option volume, macro fund rolling down put strikes,

looking for futures to price in higher probability of rate hikes in first half

of 2018. Latest spread levels: 

* 2Y +0.44/23.69 

* 5Y +0.06/7.69 

* 10Y +0.75/-2.00 

* 30Y +0.62/-29.25

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

- Oct 25 20-Oct MBA Mortgage Applications (3.6%, --) 0700ET

- Oct 25 Sep durable goods new orders (2.0%, 1.1%) 0830ET

- Oct 25 Sep durable new orders ex transport (0.5%, 0.5%) 0830ET

- Oct 25 Aug FHFA Home Price Index (0.2%, --) 0900ET

- Oct 25 Sep new home sales (0.560M, 0.555M) 1000ET

- Oct 25 20-Oct crude oil stocks ex. SPR w/w (-5.73M bbl, --) 1030ET

- Oct 25 US Tsy $15.0B 2-Year FRN auction 1130ET

- Oct 25 US Tsy $34.0B 5-Year Note auction 1300ET

Eurodollar/Treasury option summary

Eurodollar options

Pit/screen:

* +12,000 short Dec 80 puts, 5.5

* +5,000 short Jan 76/77/78 put trees, 2.0

* -7,500 Green Nov 80/81 call spds w/Blue Nov 78/80 call spds, 2.0 total

* 10,000 Dec 83/Nov 86 combo, call bought over, 0.0 net

* +6,000 Dec 85 straddles 18.0 over -2,000 Mar 81/82 2x1 put spds

* -13,000 short Nov/short Dec 81/82 call spd spds, 1.0

* +5,000 Green Sep 81 calls, 11.5 vs. 97.74/0.28%

* +10,000 Mar 81/82 2x1 put spds 1.5 over the Feb 81 puts

* +10,000 short Mar 76/77 put spds, 2.25

* Update, total +20,000 short Dec 78/80 2x1 put spds, 1.0

Large 1-, 2-, 3Y midcurve put spd package:

* -40,000 short Nov 78/80 put spds 2.0

* +40,000 Blue Nov 75/76 put spds, 3.0

* -20,000 Green Nov 77/Green Dec 75 put spds, 2.0

* +10,000 Green Dec 76/82 put over risk reversals, 2.5

* +10,000 short Dec 78/80 2x1 put spds, 1.0

* Block, 10,000 Mar 81/82 2x1 put spds, 1.5

* Block, 10,000 Dec 85 straddles, 6.5, offered in pit

* +10,000 short Dec 78/80 2x1 put spds, 1.0

* -7,500 short Dec 77/80 2x1 put spds, 3.5

* +10,500 Jun 81 puts, 6.0 vs. 98.255/0.30%

* -5,000 Red Dec'18 80 straddles vs. Red Dec'18 77 put, 30.0 net, ongoing

* -4,000 Red Sep'19 78 straddles, 58.0 vs. 97.87

* 10,000 Red Dec 76/77/78 put trees, 6.5 vs. 98.04/0.10%

* 2,000 short Dec 78/80/81 call flys

* -7,000 short Dec 80/81 put spds, 6.5 vs. 98.05

* -6,000 short Nov 77/80/81 put trees vs.

* +6,000 short Dec 77/78 put spds, 4.0 net credit

* Block, total +25,000 Jun 80/81 put spds, 3.5 vs. 98.24/0.15%

* 6,000 short Nov 78/short Dec 77 put spds, 0.0

* 2,000 Blue Dec 75/78 call over risk reversals, 0.5 net vs. 97.70/0.45%

* -10,000 Red Dec 76/77/78 put trees, 6.5 vs. 98.04/0.10%

* 4,000 Nov 86 call/Dec 83 put combo, 0.0

* 2,000 Jan 83 straddles, 10.0

-----------------

Massive put spd/roll:

* -150,000 short Dec 80/81 put spds, 6.0 (separate blocks earlier/bought at 6.5)

* +75,000 Jun 78/81 put spds, 5.0

* +75,000 Sep 77/80 put spds, 5.5

* Block, +10,000 short Dec 80/81 put spds, 6.5 vs. 98.055/0.25%, adding to

earlier buy

w/Sep 77/80p spd strip

* Block, 5,000 Sep 77/80 put spds, 6.0 vs. 98.15/0.20%

* Block, 5,000 short Dec 80/81 put spds, 6.5 vs. 98.065/0.20

* Block, +10,000 short Dec 80 puts, 5.5

Tsy options

Pit/screen:

NOB (note over bond) 10s/30s flattener

* -2,060 TYZ 124.5 straddles, 1-14/64

* +920 USZ 152 straddles, 2-49/64

* 3,000 TYH 120.5/123 put spds, 31/64 vs. 124-08

* 2,000 TYZ 124.5/125.5 1x2 call spds, 9/64 vs. 124-24

* +4,000 TYZ 126/127.5 call spds, 8/64

* 2,200 FVZ 118.5 calls, 2.5/64 vs. 124-04.25

* 1,800 TYG 126/128 call spds, 19/64 vs. 124-12.5

* 1,000 TYZ 126.5/127.5 call spds, 3/64 vs. 124-20

* -3,500 TYX 126/TYZ 124.5 call spds, 45/64 (TYZ over) vs. 124-22 to -22.5

* -3,000 FVZ 117 straddles, 47- to 46.5/64

* -6,500 TYX 124.5 puts, 11- to 12/64 vs. 124-21.5 pit/screen

* -1,000 FVZ 117 straddles, 47/64

* paper buying USZ 151 straddles, 1-51/64

* 10,000 TYX 124.25 puts 2/64 over the TYX 125.25/125.75 call spds

* 2,000 TYX 125.5 calls 3/64

* 1,950 TYX 125 puts at 25/64 vs. TYZ 122/124 put strip, 23/64

* 2,000 TYX 124.5/124.75 put spds, 6/64

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

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