US TSYS: LATE RISK-OFF/EQUITY REVERSAL AHEAD WED'S FOMC

US TSY SUMMARY: Generally quiet at the start of the two-day FOMC policy meet.

Tsys extend session highs late, risk-off tone taking hold as eqs sold off/extend

session lows. Some program selling on latter, two-way in short to intermediate

Tsys w/ better buying from specs in belly.

- Markets pricing in 25bps hike from the Fed tomorrow with a dovish tone going

forward -- pain trade would be an unexpected hawkish hike from the FOMC,

equities surely to extend sell-off in that event.

- US$ index remains mildly lower, US$/GBP and US$/Eur higher/off early highs;

West Texas Crude hammered (WTI currently -2.53 at 47.35 vs. 46.97L).

- Swap spds tighter/off first half lows following decent rate and spd receiving

in 2s, over $1B nominal earlier, receiver flys include 2s5s10s and 2s4s5s.

Earlier, short end narrowing outpaced amid continued better receivers in 2s, 5s,

payer in 10s and a 2s/5s/10s receiver flys.

- Salient data for Wednesday: Existing home sales for Nov (5.17m est), FOMC annc

(1400ET), Fed Chair Powell press conf. Tsy cash/ylds: 2Y 100-06 (2.650%), 5Y

101-00 (2.654%), 10Y 102-18.5 (2.823%), 30Y 105-24 (3.079%)

US TSY FUTURES CLOSE: Trades moderately higher as equities plummet (emini

-19.00, 2536.75); strong volume (TYH 1.38M); curves steeper, update:

* 2s10s +0.937, 17.061 (15.199L/17.268H);

* 2s30s +0.701, 42.401 (40.849L/43.100H);

* 5s30s +0.315, 42.091 (41.206L/43.238H);

Current futures levels:

* Mar Ultra bonds up 28/32 at 158-26 (157-28L/159-00H)

* Mar 30-yr Bond futures up 20/32 at 143-27 (143-06L/143-31H)

* Mar 10-yr futures up 06/32 at 120-27 (120-19.5L/120-29.5H)

* Mar 5-yr futures up 05/32 at 113-27.75 (113-22L/113-29H)

* Mar 2-yr futures up 3.25/32 at 105-27.25 (105-24.25L/105-27.5H)

US EURODOLLAR FUTURES CLOSE: Trading moderately higher near the top of the

range; strong volume. Current White pack (MAR'19-DEC'19):

* MAR'19 +0.035 at 97.280

* JUN'19 +0.050 at 97.250

* SEP'19 +0.065 at 97.230

* DEC'19 +0.065 at 97.205

* Red pack (MAR'20-DEC'20) +0.090-0.075

* Green pack (MAR'21-DEC'21) +0.080-0.065

* Blue pack (MAR'22-DEC'22) +0.055-0.050

* Gold pack (MAR'23-DEC'23) +0.045-0.040

US DOLLAR LIBOR: Latest settles, 3M to 1Y reverses course

* O/N -0.0011 to 2.1802% (-0.0045/wk)

* 1 Month +0.0005 to 2.4701% (+0.0151/wk)

* 3 Month -0.0116 to 2.7920% (-0.0087/wk)

* 6 Month -0.0283 to 2.8763% (-0.0242/wk)

* 1 Year -0.0426 to 3.0613% (-0.0364/wk)

US SWAPS: Spds running tighter by the bell w/intermediates blowing past short

end later in second half. Year-end customer position unwinds amid tight balance

sheet for dealers appears to be driving factor amid heavy rate and spd receiving

in 2s in first half (well over $1B nominal in 2s ahead midday), followed by rate

receivers in 5s-10s late; receiver flys include 2s5s10s and 2s4s5s. Earlier,

short end narrowing outpaced amid continued better receivers in 2s, 5s, payer in

10s and a 2s/5s/10s receiver flys. Latest spd levels:

* 2Y -1.19/13.38

* 5Y -1.75/8.50

* 10Y -1.50/2.00

* 30Y -0.75/-14.75

- Good entry point for wideners? Morgan Stanley strategists note "Libor-OIS

Slowing issuance of CPs suggests that Libor-OIS is unlikely to widen further

into year-end as banks already front-loaded year-end funding needs. This could

also lead to relatively subdued issuance in 1Q19." MS notes risk to market

pricing of Mar'19 FRAOIS is to the upside are due to "see outflows and

shortening WAMs in 1Q...As a result, we remain in March 2019 3m FRAOIS wideners

and expect to re-enter 2y swap spread wideners early next year."

US TSYS: *** /REPO REFERENCE RATES: (rate, volume)

* Secured Overnight Financing Rate (SOFR): 2.31% vs. 2.21% prior, $935B

* Broad General Collateral Rate (BGCR): 2.28% vs. 2.19% prior, $428B

* Tri-Party General Collateral Rate (TGCR): 2.28% vs. 2.19% prior, $407B

PIPELINE: No new corporate issuance

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

19-Dec 0700ET 14-Dec MBA Mortgage Applications (1.6%, --)

19-Dec 0830ET Q3 current account balance (-$101.5B, -$124.5B)

19-Dec 1000ET Nov existing home sales (5.22m , 5.17m)

19-Dec 1030ET 14-Dec crude oil stocks ex. SPR w/w

19-Dec 1400ET FOMC policy announcement

19-Dec 1430ET Fed Chair Powell press conference

Eurodollar/Treasury Option Summary 

Eurodollar options, Pit/screen:

block, 14:06:03ET

* 15,000 Jun 73/75/76 call tree at 0.75 vs 9723/0.05%, adds to recent 11,873

block

* 7,000 Short Feb 72/73/75 call tree at 1block, 13:28:38ET

* 11,873 Jun 73/75/76 call tree at 0.75 vs 9723/0.05%, note earlier 5k traded at

0.5 in pit

* +10,000 Blue Feb 68 puts at 1

block, 12:23:33ET

* 10,000 Mar 71/72 put sprd at 4

* +20,000 Jan 71 puts at 0.75 vs 9727/0.12%

* 7,500 Green Mar 70/76 calls over risk reversal at 1 vs 9730/0.42%

* 5,000 Jun 70 puts at 3.25 vs 9723/0.20%

* 8,000 Dec 70/71 put sprd at 5 vs 9721/0.10%

* 10,000 Short Feb 72/73/75 call tree at 1

* 7,500 Mar 70/71 put sprd at 1.75 vs 9726.5/0.10%, note 55k at 1.5 vs

9728/0.10%

* 5,000 Short Jan 73 calls at 3

* -5,000 Dec 67/70/71 broken put tree at 0

* +5,000 Mar 70/72 put sprd with Sep 67/70 put sprd at 11

block, 09:57:24ET

* +10,000 Jun 70 puts at 3.25

* 7,000 Short Mar 72/73/75 call fly at 1.5

* 5,000 Jun 73/75/76 call tree at 0.5

* 10,000 Short Mar 68/70/71 put tree at 2

* 8,000 Dec 67/70 put sprd at 7 vs 9719.5/0.15

* 5,000 Jan 73/76 2x3 call sprd at 2.5

* 5,000 Short Mar 70/71/72 put tree at 1.5

* 7,500 Long Green Sep 72/75 call sprd at 10.5

* 5,000 Mar 71 Straddle at 19.5

* +10,000 Green Mar 67/68/70 put tree at 1

* 2,500 Short Jan/Short Mar 71 call sprd at 5

* +55,000 Mar 70/71 put sprd at 1.5

* +5k Mar19 97.375 calls, paper pays 3.5

* +13k Mar19 97.125/97.00 put spread, paper paid 1.5 (v 97.27 10d) -mkt src

Tsy options, Pit/screen:

* 5,904 TYF 121/122 call sprd at 10

Block, 1146:39ET,

* 12,000 TYF 121.25/121.75 call spds, 5/64

* 10,000 TYF 120.5/121.5 call spds at 21/64 vs. TYG 121.5/122.5 call spds at

11/64

* 7,000 TYF 120.5/121 call spds at 14, note recent 5k traded at 15

* 5,000 TYF 120.5/121 call spds, 15/654

* 3,000 FVF 113.75/FFG 114.25 call spds, 0.0

* 5,000 TYF 120.5/121 call sprd at 15

* 3,000 TYF 120.5 puts at 9 vs 23.5/0.34%, note +5k bought earlier at 8

* 3,000 FVF 113.75/FVG 114.25 call sprd at 0

* -3,720 FVG 114 calls at 17.5/64 vs. +2,400 TYG 121 calls at 30/64,

conditional, duration weighted flattener

* +5,000 TYF 120.5 puts, 8/64

* Update, +8,000 FVF 113.75 straddles 21.5- to 22/64

* 2,500 TYF 120.5/121 strangles, 18/64

* 1,000 TYF 121/122.5 call spds, 2/64

* note, screen trade of 50k TYG 121.5/122.5 call spds at 11/64 is a buy

* 50,000 TYG 121.5/122.5 call spds at 11/64 on screen

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

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