US TSYS: MIDDLE EAST GEOPOL RISKS ON GLOBAL FRONT BURNER

     US TSY SUMMARY: Strong risk-off/safe-haven bid for Tsys on heavier volume

(TYH>1.6M by bell), heavy selling on day in equities, Gold was nearly $22.0

higher following last night's US Strike On Iran's Soleimani, turning up to

already high Middle East tensions after US Defense Sec. Esper warned potential

for "preemptive strike" vs. Iranian militia Thursday morning. 

- Yld curves continued to bull flattening w/3M10Y 10bps off Thu's highs, 2s10s

8bps flatter as long end extended highs into the close. Focus off data, little

react to Dec FOMC minutes.

- Tsys pared gains into midday/equities inched off lows (ESH0 -15.0 at 3244.0

after falling to 3263.5 ahead the NY open). Middle-east geopolitical tensions

only just getting warmed up after last nights US Strike on Iran's Soleimani, but

fear of immediate reprisals do appear to be cooling at the moment with some

strategists suggesting global effect is more regional and unlikely to "derail"

US economy. All remains fluid, any escalation sure to add momentum to risk-off

move. The 2-Yr yield is down 4.2bps at 1.5266%, 5-Yr is down 7.7bps at 1.5896%,

10-Yr is down 8.6bps at 1.7916%, and 30-Yr is down 7.5bps at 2.2558%.

TECHNICALS: 

US 10YR FUTURE TECHS: (H0) Approaches Key Resistance  

*RES 4: 130-17+ High Nov 1

*RES 3: 130-04+ High Dec 3 and primary resistance   

*RES 2: 129-20   High Dec 5

*RES 1: 129-14   High Dec 12 and near-term bull trigger

*PRICE: 129-08+ @ 11:48 GMT, Jan 3

*SUP 1: 128-20   Intraday low 

*SUP 2: 127-29   Low Dec 13 and bear trigger

*SUP 3: 127-18+ 1.618 projection of the Oct 3 to Nov 7 low from Dec 3 high

*SUP 4: 127-00   Round number support

US 10yr futures are rallying and approaching a key resistance at 129-14, Dec 12

high. A break of this level would undermine the recent bearish focus and instead

signal scope for a climb towards 130-04+, Dec 3 high and the primary resistance.

While 129-14 remains intact though, a return lower is still possible. First

support has been identified at 128-20, today's intraday low. A move below this

level would again open 127-29, Dec 13 low.

     AUSSIE 10-YR TECHS: (H0) Capped by 50-dma 

*RES 3: 98.8950 - High Dec 10 and 11

*RES 2: 98.8500 - High Dec 18

*RES 1: 98.8209 - 50-DMA 

*PRICE: 98.7450 @ 15:59 GMT, Jan 03

*SUP 1: 98.5700 - Low Jan 2 

*SUP 2: 98.5348 - 1.236 projection of Dec 5 - Dec 13 decline from Dec 18 high

*SUP 3: 98.4976 - 1.382 projection of Dec 5 - Dec 13 decline from Dec 18 high

Aussie 10yr futures bounced for a second session Friday, but bulls will get

little respite as the outlook remains weak. After former support at 98.6500 (the

Dec 24 and 30 lows) was cleared, this confirmed a resumption of the current

bearish cycle that has been in place since Nov 28. The focus is on a move

towards 98.5348 and 98.4976 next, both Fibonacci projection levels. Firm

short-term resistance has been defined at the 50-dma at 98.8209. 

     JGB TECHS: (H0): Has Stabilized

*RES 3: 153.55 - High Nov 28 and key resistance

*RES 2: 153.11 - High Dec 4

*RES 1: 152.50 - High Dec 9

*PRICE: 152.13 @ 19:48 GMT, Dec 30

*SUP 1: 151.62 - Contract lows, Dec 20

*SUP 2: 151.11 - 76.4% retracement of August 2018 - September 2019 Rally

*SUP 3: 150.51 - 1.0% lower 10-dma envelope

JGB futures are consolidating following the recent recovery off the Dec 23 low

of 151.62. The underlying trend remains bearish and the focus is on an eventual

break of 151.62 to open 151.48 and 151.18, 0.764 and 1.00 Fibonacci projection

levels of the decline between Dec 4 - Dec 10 from the Dec 11 high, ahead of the

151.11 Fibonacci retracement level. A break below the latter would open the 1.0%

lower 10-dma envelope at 150.51. Resistance is at 152.50.

TSY FUTURES CLOSE: Extend session highs right into the closing bell as

risk-off/safe haven buying gains momentum as geopolitical risks stemming from US

actions in Middle East remain high over weekend. Yld curves bull-flatten to new

lows. Update:

* 3M10Y  -7.856, 26.78 (L: 25.765 / H: 31.58)

* 2Y10Y  -4.463, 26.149 (L: 26.002 / H: 29.957)

* 2Y30Y  -3.385, 72.635 (L: 72.15 / H: 76.732)

* 5Y30Y  +0.031, 66.339 (L: 65.417 / H: 69.509); Current futures levels:

* Mar 2-Yr futures up 3.375/32 at 107-26.625 (L: 107-23.375 / H: 107-27.75)

* Mar 5-Yr futures up 12.5/32 at 119-1.75 (L: 118-21.5 / H: 119-03.5)

* Mar 10-Yr futures up 23.5/32 at 129-11.5 (L: 128-20 / H: 129-14)

* Mar 30-Yr futures up 1-19/32 at 158-06 (L: 156-21 / H: 158-10)

* Mar Ultra futures up 2-30/32 at 185-28 (L: 183-04 / H: 185-31)

US EURODLR FUTURES CLOSE: Broadly higher across the strip, short end lagging

despite continued decline in 3M LIBOR set: -0.0264 to 1.8738% (-0.0708/wk).

Current White pack (Mar'20-Dec'20):

* Mar 20 +0.005 at 98.275

* Jun 20 +0.030 at 98.350

* Sep 20 +0.055 at 98.425

* Dec 20 +0.070 at 98.455

* Red Pack (Mar 21-Dec 21) +0.080 to +0.090

* Green Pack (Mar 22-Dec 22) +0.095

* Blue Pack (Mar 23-Dec 23) +0.095 to +0.105

* Gold Pack (Mar 24-Dec 24) +0.10 to +0.105

US DOLLAR LIBOR: Latest settles

* O/N -0.0038 at 1.5367% (+0.0005/week)

* 1 Month -0.0202 to 1.7142% (-0.0852/wk)

* 3 Month -0.0264 to 1.8738% (-0.0708/wk)

* 6 Month -0.0166 to 1.8929% (-0.0278/wk)

* 1 Year -0.0308 to 1.9640% (-0.0403/wk)

US SWAPS: Spds running tighter, adding to Thu's reversal, wings were outpacing

intermediates for much of session but flurry of late paying in intermediates to

long end helped 5s-30s rebound slightly. Decent flow kicked off w/better

receiving in 2s, 5s and 7s earlier, flurry of rate paying in intermediates by

midmorning followed by another round of receiving in 7s, 8s and 9s last hour.

Current spd levels:

Fri 1500    -1.12/+9.06    -0.38/+2.12   -0.38/-3.56    -1.06/-31.25

1315        -0.88/+9.31    -0.75/+1.75   -0.62/-3.81    -1.62/-31.81

1200        -1.19/+9.00    -0.69/+1.81   -0.62/-3.81    -1.44/-31.62

1030        -1.25/+8.94    -0.50/+2.00   -0.56/-3.75    -1.19/-31.38

Fri Open    -0.44/+9.75    -0.44/+2.06   -0.56/-3.75    -0.94/-31.12

Fri 0745    -0.38/+9.81    -0.38/+2.12   -0.56/-3.75    -0.94/-31.12

Thu 1500    -2.38/+10.06   -1.44/+2.31   -0.69/-3.19    -0.62/-30.50

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

* Daily Effective Fed Funds Rate: 1.55%, volume: $74B

* Daily Overnight Bank Funding Rate: 1.54%, volume: $170B

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

* Secured Overnight Financing Rate (SOFR): 1.54%, $1.123T

* Broad General Collateral Rate (BGCR): 1.50%, $380B

* Tri-Party General Collateral Rate (TGCR): 1.50%, $344B

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

06-Jan 0945 Dec Markit Services Index (final) (52.2, 52.2)

06-Jan 1130 US Tsy $42B 13W bill (912796TQ2) auction

06-Jan 1130 US Tsy $36B 26W bill (912796WW5) auction

PIPELINE: No new issuance Friday, high-grade supply expected to return next week

with an estimated $35B for week and $120B for month.

Eurodollar/Tsy options 

Eurodollar options:

* +20,000 Apr 83/86 call spds, 4.0

* +10,000 Jun 87 calls, 1.5

* -5,000 Mar 82/83 2x1 put spds, 6.5 earlier

* -5,000 Mar 81/82/83 put flys, 7.0

* +3,000 Green Jan 87/88 call strip, 3.0

* +15,600 Mar 80 calls, 30.5 vs. -54,600 Mar 82/86 call spds, 5.5 vs. 98.29

* 4,000 Mar 81/82 put spds, 1.75

* +5,000 Sep 81/82/83 put flys, 4.25

Recent screen trade,

* 13,000 Feb 82/83 1x2 call spds, 2.25

* +10,000 Sep 86/90 call spds, 4.5 vs. 98.405/0.18%

* +10,000 Mar 83/85 1x2 call spds, 0.0 w/

* +5,000 short Mar 86/87 2x3 call spds, 1.0

* 2,500 Mar 85/short Mar 87 call spds, 3.0

* +10,000 Mar 82 puts, 2.25 vs. 98.29/0.20%

* 10,000 Dec 90/92/95 call flys, 1.0 vs. 98.465/0.05%

* 14,500 Apr 82 puts, 1.75 vs. 98.35/0.25% adds to +10k Block at 0903:40ET

* 2,500 Jun 85 straddles, 24.0 vs. 98.35

Block, 0903:40ET

* 10,000 Apr 82 puts, 1.75 vs. 98.35/0.25%

* +9,700 short Jan 83/87 put over risk reversals on screen, 0.5 net

* +7,000 Mar 85 calls, 1.25 vs. 98.295/0.12%

* 1,000 Green Jan 83/85 strangles, 5.5

Latest screen trade, checking levels

* 15,000 Feb 82/83 1x2 call spds w/

* 15,000 Jan 82/83 call spds

* 10,0200 short Jan 87/90 call spds

Tsy options:

* -5,000 TYH 128/130 call over risk reversals from 7- to 8/64

* 2,000 TYG 127.5/128.5/129.5 2x3x1 call flys, 8/64 net

* -1,000 FVG 119 straddles, 36.5/64

* -5,000 TYG 126.5/129.5 call over risk reversals, 20/64 vs.

* +2,500 TYG 130 calls, 13/64

* 1,400 TYG 128.5/129.5 strangles, 38/64

* 1,000 TYG 128/129 put spds, 21/64

* +5,000 TYH 138.5 calls on screen, cab-7

* >-4,000 TYH 127.5/130.5 strangles from 34- to 33/64

* >4,800 TYG 130.5 calls, 8/64 last

Overnight trade includes

* >+16,000 TYG 128.25/130 call over risk reversals from 0.0-1/64

* additional TYG 130 call buying pushes volume >29k

* >13,500 TYG 128 puts, 9/64 last

* >+11,900 TYH 135.5 calls, 1/64

* >6,500 TYG 129 straddles, 63- to 1-0/64, apparently selling into current bid

for vol, adding to decent selling on Thursday's NY session

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

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