US TSYS: LATE GAP BID IN TSYS AS EQUITIES COME UNGLUED

US TSYS SUMMARY: Gap bid in rates on the close, massive risk-on bid absent

earlier in session as equities fell apart -- panic selling w/some equating it to

a flash crash, heavy sell programs (>-1,600 largest since 2014). Heavy chop,

DJIA down over 1,500 in late trade now -990.0, S&P -110.0 now

-80.0 and Nasdaq -260.0 now -180.0. CBOE VIX vol index gaps +18.42 to 35.73.

- Tsys traded mixed for much of session, curves adding to Fri's bear steepening.

Reluctant rebound in rates, long end pared losses later in second half as equity

sell-off accelerated. Tsys gapped higher, buy stops triggered on rally as DJIA

dropped over 1,500 at one point. Tsy yld fell/rebound slightly: 10Y yld 2.7487%

-.0924 vs. 2.7056 low; 30Y yld 3.0275% -.0593 vs. 2.9740% low.

- Since the 1500ET bell, over 480k TYH traded from 12108-121-30, Vwap 121-18.

Total TYH volume on day >2.3M.

- Swap spd curve on session flats vs. continued steepening in Tsys Short end

extending wider; long end that has marched significantly tighter over last two

hours, back to mid-Jan levels (-16.0). Spd curve stop-outs likely in play

- Late ylds: 2Y 2.073%, 3Y 2.234%, 5Y 2.496%, 7Y 2.673%, 10Y 2.762%, 30Y 3.037%

US TSY FUTURES CLOSE: Late gap bid for Tsys as equities get slammed/bouncing on

heavy chop, DJIA down over 1,500 in late trade now -830.0, S&P -110.0 now -70.0

and Nasdaq -260.0 now -150.0. CBOE VIX vol index gaps +18.42 to 35.73. Curves

recede as long end gaps higher, latest curve update:

* 2s10s -1.636, 67.942 (73.161H/67.135L);

* 2s30s +1.440, 95.591 (99.552H/93.896L);

* 5s30s +4.242, 53.992 (54.739H/50.439L);

Current futures levels -- note late session highs ***

* Mar Ultra bonds up 1-20/32 at 159-06 (156-13L/160-29H)

* Mar 30-yr Bond futures up 1-18/32 at 146-11 (144-03L/147-16H)

* Mar 10-yr futures up 26.5/32 at 121-18 (120-18L/121-30H)

* Mar 5-yr futures up 15.75/32 at 114-29 (114-12L/115-04.5H)

* Mar 2-yr futures up 4.75/32 at 106-23.75 (106-19L/106-26.75H)

US EURODOLLAR FUTURES CLOSE: Late session panic selling in equities (DJIA off

over 1500.0 at one point, rebounds to -800.0 now -1,100), spurs late risk-off

buying in rates absent earlier in session. Levels below well off gap highs,

current White pack (Mar'18-Dec'18):

* Mar'18 +0.010 at 98.110

* Jun'18 +0.030 at 97.900

* Sep'18 +0.055 at 97.785

* Dec'18 +0.070 at 97.655

* Red pack (Mar'19-Dec'19) +0.075-0.105

* Green pack (Mar'20-Dec'20) +0.120-0.130

* Blue pack (Mar'21-Dec'21) +0.130-0.120

* Gold pack (Mar'22-Dec'22) +0.120-0.110

US SWAPS: Spd curve on session flats vs. continued steepening in Tsys Short end

extending wider. But it's the long end that has marched significantly tighter

over last two hours, back to mid-Jan levels (-16.0). No confirmation, but spd

curve stop-outs likely in play as well as noted in Tsys earlier. short end

heating up in overnight repo adding to move in short end. If Fed announces bank

de-regs/softer leverage ratios, would be a good place to enter. However, after

Fri's sanction against Wells Fargo, is probability of softer bank reg's falling?

Earlier flow included flatteners in 5s vs. 7s and 10s, $457.6k 5s6s30s fly,

paying belly and $165.2k 2s4s7s fly, receiving belly Latest spread levels:

* 2Y  +1.88/23.62

* 5Y  +0.12/9.69

* 10Y -1.62/1.88

* 30Y -3.19/-16.75

PIPELINE: Details $1B COE 5Y

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

02/05 $1B Council of Europe Development Bank (COE) WNG 5Y MS +14 area

02/05 $Benchmark Province of Ontario 3Y MS +16 area

02/05 $Benchmark European Investment Bank (EIB) 3Y MS +3

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 06 Dec trade balance (-$50.5B, -$52.0B) 0830ET 

- Feb 06 03-Feb Redbook retail sales m/m (0.0%, --) 0855ET 

- Feb 06 Feb IBD/TIPP Optimism Index (55.1, --) 1000ET 

- Feb 06 Dec JOLTS job openings level (5.879M, --) 1000ET 

- Feb 06 Dec JOLTS quits rate (2.2%, --) 1000ET 

- Feb 06 US Tsy $26B 3Y note auction 1300ET 

- Feb 06 Jan Treasury STRIPS Holdings 1500ET 

- Feb 06 StL Fed Pres Bullard on U.S. Eco/MonPol at 29th Ann Gatton College of

Business and Economics Economic Outlook Conference, Lexington, Kentucky,

audience Q&A. 0850 ET

Eurodollar/Treasury Option Summary

Eurodollar options, Pit/screen: 

* +5,000 Red Mar'19 75 straddles w/+10,000 Dec 76/80 1x2 call spds, 45.5 total

* -10,000 short Jun 72/73 put spds vs.

* +10,000 Green Jun 71/72 put spds, 2.0 net conditional steepener

* +5,000 Green Mar 70 puts, 2.5 vs. 97.185/0.10%

* +2,000 shot Jun 72/75 5x2 put spds, 6.5 vs. 97.42/0.28%

Blocks,

* another +20,000 short Jun 72 puts, 5.5 at 1251:23 to 1252:47ET

* +10,000 short Jun 72 puts, 5.0 vs. short Jun 75 calls, 9.0 at 1250:53ET

* +11,000 Jun 77/78 2x1 put spds, 3.75

* total +5,000 Red Dec'19 66/68/71 put trees, 1.5

* +5,000 Feb 81 calls, cab

* +3,000 Sep 75 puts, 1.0 vs. 97.72/0.10%

* +2,500 Green Feb 70 puts, 1.0 vs. 97.195/0.10%

* Update, total +20,000 Feb/Mar 81 call spds, 0.75/March over

* Update, total -20,000 short Jun 72/73 put spds, 4.0-4.5 w/

* total -60,000 short Jun 70/71 put spds, 1.5, 8.5-9.0 total cr

* +10,000 short Mar 72/75 put spds, 4.5 vs.

* -10,000 Green Mar 70/72 put spds, 7.5, 3.0 net cr flattener

* 3,500 Green Mar 68/71 2x1 put spds, 2.5

* -30,000 Green Mar 68/71 put spds, 3.75 legged

* +10,000 Green Mar 71 puts, 5.0 vs. 97.235/0.30 vs.

* -10,000 Blue Mar 70 puts, 6.0 vs. 97.115/0.30, 1.0 net cr flattener

* 2,500 Red Dec'19 66/68/71 put trees, 1.5

* +10,000 Feb/Mar 81 call spds, 0.75/March over

* -2,000 Dec 76/77/78 call trees, 0.5

Tsy options, Pit/screen:

* 10,000 wk2 FV 114.5 puts, 5.5/64 vs. 114-19.5

* 1,000 UJ 139/148 call over risk reversals, 4/64

* Update, total +5,500 TYJ 119 puts at 18/64, 3k covered

* screen, +50,000 FVH 115 calls, 4/64 (open interest 13,576 coming into session)

* over -8,000 USM 141 puts on day from 1-36- to 1-41/64

Blocks, 0909ET, adds to -10k at 19.5

* -8,560 FVJ 114.5 calls, 17.5/64

* 2,000 TYH 120.5/120.5 put spds, 20.5/64

Blocks, 0817ET,

* -10,000 FVJ 114.5 calls, 19.5/64

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

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