US TSYS: LATE VIRUS VACCINE HEADLINES SPUR STRONG RISK-ON MOVE

US TSY SUMMARY: Choppy day for rates with much of the heavier volumes (TYH>2.9M)

occurring in the first half. Carry-over risk-off bid for Tsys helped push ylds

to new all-time lows in early Asia trade (10YY 1.0283%; 30YY 1.5803%). Yld

curves bull steepening on increased prospect of FOMC making several rate cuts

this year. Accts sidelined ahead Fri's employment data.

- Bouncing off post open lows, futures and implied vols received boost from

equities moving lower. Early flow included fast$ selling 2s-10s turning two way

with prop and real$ buying intermediates now, swap-tied buying 2s and 30s,

selling intermediates. Little to no react to data, focus more on COVID-19 virus

response rather than steady rise in case counts and mortality figures for once.

- No single factor but myriad smaller items helped equities climb higher through

the session, eminis +84.0 in late trade. G7 finance ministers and central bank

bankers to join Tuesday's call to discuss a response to the Coronavirus at

0700ET. 

- The 2-Yr yield is down 8.1bps at 0.8317%, 5-Yr is down 6.5bps at 0.8702%,

10-Yr is down 5.9bps at 1.0898%, and 30-Yr is down 2.9bps at 1.646%.

TECHNICALS:

US 10YR FUTURE TECHS: (H0) Still Defying Gravity

*RES 4: 137-23+ 1.618 projection of Jan 9 - Feb 3 rally from Feb 6 low

*RES 3: 136-30   1.50 projection of Jan 9 - Feb 3 rally from Feb 6 low

*RES 2: 136-04+ 1.764 projection of Jan 9 - Feb 3 rally from Feb 6 low

*RES 1: 135-27   Intraday high  

*PRICE: 135-04+ @ 16:31 GMT, Mar 2

*SUP 1: 134-24+ Intraday low

*SUP 2: 133-00+ Low Feb 27

*SUP 3: 132-22+ Low Feb 26

*SUP 4: 131-29   High Feb 3 and former breakout level 

The uptrend in Treasuries remains intact with a fresh high print again today at

135-27. Last week's rally resulted in a break of the Feb 3 high of 131-29,

confirming a resumption of the current bull trend, Bulls haven't looked back.

Moving average studies remain in a positive mode too although it is still worth

noting that the trend remains overbought. Support is at 133-17+, the focus is on

136.00 and 136.04+ next. The latter level is a Fibonacci projection.

TSY FUTURES CLOSE: Bid after the bell but well off early overnight highs to near

mid-range for the day. Long end paring back gains late as equities hold strong

gains most of the session. Yld curves hold steeper profiles. Update: 

* 3M10Y  +6.045, -9.121 (L: -27.448 / H: -6.611)

* 2Y10Y  +3.202, 26.164 (L: 24.981 / H: 34.525)

* 2Y30Y  +6.634, 82.258 (L: 80.5 / H: 91.604)

* 5Y30Y  +4.578, 78.376 (L: 76.243 / H: 82.787); Current futures levels:

* Jun 2-Yr futures up 2.625/32 at 109-7.875 (L: 109-05.625 / H: 109-15.5)

* Jun 5-Yr futures up 6.75/32 at 122-30.75 (L: 122-25.5 / H: 123-14)

* Jun 10-Yr futures up 10/32 at 135-2 (L: 134-21 / H: 135-24.5)

* Jun 30-Yr futures up 22/32 at 170-30 (L: 169-18 / H: 172-09)

* Jun Ultra futures up 10/32 at 207-26 (L: 205-16 / H: 210-26)

US EURODLR FUTURES CLOSE: Mixed by the bell, Whites very well bid as market

prices in increased chances of several 25 bps rate cuts by year end or

combination of 25-50bp moves). Reds through Golds steady to mildly weaker --

well off overnight highs. Current White pack (Mar'20-Dec'20):

* Mar 20 +0.127 at 98.767

* Jun 20 +0.105 at 99.070

* Sep 20 +0.075 at 99.160

* Dec 20 +0.050 at 99.145

* Red Pack (Mar 21-Dec 21) -0.02 to +0.020

* Green Pack (Mar 22-Dec 22) -0.015 to -0.01

* Blue Pack (Mar 23-Dec 23) -0.005 to steady

* Gold Pack (Mar 24-Dec 24) -0.005 to steady

US DOLLAR LIBOR: Latest settles, second consecutive largest declines since

December 2008, 3M back to June 2017 levels

* O/N +0.0069 at 1.5746% (-0.0025 last week)

* 1 Month -0.1595 to 1.3557% (-0.1115 last wk)

* 3 Month -0.2090 to 1.2537% (-0.2165 last wk)

* 6 Month -0.1989 to 1.1983% (-0.3890 last wk)

* 1 Year -0.2276 to 1.1539% (-0.3471 last wk)

US SWAPS: Intermediate spds lead charge wider, pulling wings off earlier lows as

markets looking to scale back at least some of the risk-aversion trade over the

past week. fast$ continued rate paying in 2s-10s. Note, intermediates appr 8-9bp

off last week Mon's inverted lows. Latest spd levels:

Time(ET)   2Y Swap/Mid    5Y Swap/Mid   10Y Swap/Mid   30Y Swap/Mid

Mon 1500   -0.25/+6.75    +2.06/+6.44   +1.94/-1.31    +0.12/-37.38

1330       -0.44/+6.56    +2.31/+6.69   +2.12/-1.12    +0.38/-37.12

1200       -0.75/+6.25    +2.31/+6.69   +2.06/-1.19    +0.12/-37.38

0930       -1.38/+5.62    +1.12/+5.50   +1.00/-2.25    -1.00/-38.50

Mon Open   -0.69/+6.31    +1.12/+5.50   +0.81/-2.44    -1.50/-39.00

Mon 0715   -0.50/+6.50    +0.62/+5.00   +0.88/-2.38    -1.50/-39.00

Fri 1500   +2.19/+6.44    +1.88/+3.50   +1.38/-4.25    -0.00/-38.00

Friday recap: Spds gapped wider after Friday's open, combination of risk-off and

rate paying in shorts to intermediates as safe haven bid for rates held strong

ahead weekend. Long end rebuffed move, mildly tighter all session on the back of

convexity acct receiving as 30YY slipped below 1.650%.

STIR: Federal Reserve Bank of New York EFFR for prior session:

* Daily Effective Fed Funds Rate: 1.58%, volume: $61B

* Daily Overnight Bank Funding Rate: 1.58%, volume: $154B

US TSYS: REPO REFERENCE RATES:

* Secured Overnight Financing Rate (SOFR): 1.60%, $1.156T

* Broad General Collateral Rate (BGCR): 1.59%, $447B

* Tri-Party General Collateral Rate (TGCR): 1.59%, $436B

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

03-Mar  -   Feb NA-made light vehicle sales SAAR (16.84m, 16.80m)

03-Mar 0855 29-Feb Redbook retail sales m/m

03-Mar 0945 Feb ISM-NY current conditions (45.8, --)

03-Mar 1000 Mar IBD/TIPP Optimism Index

03-Mar 1630 NY Fed Exec VP Loganv Transition to "Steady-State Ample Reserves

Regime"

03-Mar 1830 Chi Fed Pres Evans, moderated discussion, UofI

PIPELINE: Nothing in the pipeline so far, issuers remain sidelined 

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

Chatter for early March

02/?? $Benchmark Belarus 15Y (in addition to EUR 6- or 8Y)

-

Only $1B priced last wk, virus pandemic/mkt risk kept issuers sidelined after

heavy $107.5B for February

02/27 $1B *European Investment Bank (EIB) WNG 4Y SOFR+28

Eurodollar/Tsy options 

Eurodollar options:

Block, 1425:43ET, adds to appr 20k sold in pit

* 10,000 Jun 85/87 call spds, 22.5

Block, 1234:00ET, adds to early 10k block after buying near 100k Jun 92/97 1x3s

* another 10,000 Jun 93/97 1x3 call spds, 3.75, 20k total

* 10,000 Jun 85/87 call spds, 22.5

HEAVY June call volume on day as multiple rate cuts remain priced into

underlying by year end:

* Update +55,000 (20k just blocked) Jun 87/88 call spds 3.0 over Jun 88 puts vs.

99.075/0.40%

* Dealer buys 80,000 Jun 95 calls, 3.0

* +5,000 Jul/Sep 96/97/98/100 call condor strips, 2.5

Block, 1124:30ET, tightening up the ratio spd after buying near 100k Jun 92/97

1x3s

* 10,000 Jun 93/97 1x3 call spds, 3.75

Block, 1039ET

* another +15,000 Jun 92/97 1x3 call spds, 7.5 brings day total to 85k so far

* +50,000 Jun 92/97 1x3 call spds, 7.0-7.5 adds to +20k block earlier

* 10,000 Jun 88/90 call strip, 49.5 vs.99.105

* +10,000 Mar 88/90 call spds, 1.75

* 10,000 Mar 83 puts, 0.5

* Update, total -25,000 Jun 87/88 call strips, 62.0 vs. 99.07

* 25,000 Jun 85/87 put spds 3.0 vs. short Jun 87/90 put spds, 4.5

* Recent BLOCK, 10,000 May 92 calls, 7.5 vs. 99.085/0.30%

* -10,000 Red Jun 85/86/87 call trees, 6.0

Blocks,

* 7,500 Sep 93/96 2x5 call spds, 2.0 net at 0923:07ET

* total 40,000 Jun 92/97 1x3 call spds, 7.5 net from 0912-0929ET

Block, 0922-0925ET,

* total 20,000 Jun 92/97 1x3 call spds, 7.5 net

On screen just prior, flurry Jun 96 calls pushes volume near 60,000

Block, 0908:51ET, total near 75k, desks say sale

* another 18,835 Dec 92 calls, 19.0 vs. 99.235/0.48%,

* BLOCK, 13,750 Mar 92 calls, .75

* BLOCK +25,000 Jun 95/97 call spds vs. short Jun 97/100 call spds, 0.0 net

steepener

* BLOCK total 40,000 Dec 92 calls, 19.0 vs. 99.235/0.48%, sources say sale

* -16,000 Red Jun 85/86/97 call trees, 6.0, similar earlier Red Mar and Red Sep

blocks

* Another -10,000 short Jun 97/100 call spds, 2.5

* 5,000 Dec 87.88 call strips, 62.5 vs. 99.07

Salient overnight screen trade

* over 110,000 Mar 90 calls from 2.0 to 3.75

* over 70,000 Mar 87 calls, 9.5-12.75

* near 50,000 Dec 80 puts, cab

Blocks,

* total 15,000 Dec 92 calls, 19.0 vs. 99.235/0.48% at 0658-0659ET

* 7,500 Sep 87/90 2x3 call spds, 6.0 net at 0656:59ET

Block, 0741-0743ET,

* total 20,000 May 88/90 call spds 2.75 over the May 88 puts vs. 99.11/0.46%

Block, 0650:03ET

* 35,000 May 95 calls, 4.0 vs. 99.17/21% adds to earlier 15k Block at 3.75

Block, 0650:03ET

* 5,000 Mar 86/88 1x2 call spds, 9.0

Blocks,

* 5,000 Mar 86/88 1x3 call spds, 3.0 at 0636:41ET

* 10,000 Jul 95 calls, 7.5 vs. 99.285/0.30 at 0635:24ET

* total 15,000 May 95 calls, 3.75 vs. 99.17/0.21% from 0618-0619ET

* 5,000 Red Mar 85/86/97 call trees, 5.0 net at 0609:32ET

* 5,000 Red Sep 85/86/97 call trees, 2.5 net vs. 99.335/0.24% at 0605:49ET

Tsy options:

* +5,586 TYJ 131.5 calls, 4/64 vs. 135-00.5

* 1,600 TYJ 131.5/134.5 call over risk reversals, 1-28/64

* -1,000 TYK 135 straddles, 2-38/64

* -4,000 TYM 132/139 strangles recently at 58- to 56/64, implieds coming in hard

as rally in underlying moderates

* 9,500 FVM 123.5/125 1x2 call spds, 1.5-5.0

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

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