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US TSYS SUMMARY: Treasuries ended Tues mixed, flatter as the 2/10-year Tsy
curve visited the flattest levels since Nov. 2007 (+67.435 bps); also outright
flatteners done in 2s, 5s vs. 10s, 30S.
- Stocks pressured as bank shares reacted negatively to flatter yield curve, but
off lows. House tax reform bill has tentative vote Thu, but some feel it may not
pass. Mkts eyed geopolitical tension between US/N.Korea with US Pres. Trump in
region on Asian tour thru Nov.14; leaderless Catalonia vs. Spain rule; and
Brexit/EU negotiation tug-of-war. But EGB peripheral bond spreads in Portugal,
Italy, Spain and Greek 10Y spread to Germany all narrowing.
- Tsys futures near higher end of range after mixed $24B 3Y note auction (53.5%
indirects, 1.750% rate, 2.76 bid/cover). Tsys had two-way front end action
earlier, real$ sold 5Y, fast$ unwound 5/30Y flatteners, technical sellers in
cash as 10Y neared 200-day movg avg; some cited 2.3101% as the 200-day moving
average on cash 10-year notes.
- US$ high-grade corporate bond issuance proved heavy Tuesday.
- TSYS 3PM ET: 2y 1.629%, 3y 1.735%, 5y 1.983%, 7y 2.170%, 10y 2.309%, 30y
US TSY FUTURES CLOSE: Steady to mixed after the bell, Tsy curve continues to
flatten, revisiting levels not seen since early Nov'07, 67.255 low. Current
* Dec Ultra bonds up 25/32 at 167-28 (166-22L/167-31H)
* Dec 30-yr Bond futures up 14/32 at 154-21 (153-29L/154-24H)
* Dec 10-yr futures up 2/32 at 125-13.5 (125-06L/125-15H)
* Dec 5-yr futures up .5/32 at 117-09.25 (117-05.75L/117-10H)
* Dec 2-yr futures down .25/32 at 107-20.25 (107-19.75L/107-20.5H)
US EURODLR FUTURES CLOSE: Steady/mixed by the close, short end underperforming
after some second half Block buys EDM8 1Yr bundles. Current White pack
* Dec'17 -0.005 at 98.470
* Mar'18 -0.010 at 98.320
* Jun'18 -0.010 at 98.205
* Sep'18 -0.005 at 98.135
* Red pack (Dec'18-Sep'19) -0.005
* Green pack (Dec'19-Sep'20) steady to +0.005
* Blue pack (Dec'20-Sep'21) steady to +0.010
* Gold pack (Dec'21-Sep'22) +0.010-0.015
US SWAPS: After a flatter start, the spd curve steepened out significantly into
the second half, long end marching wider. Swap desks reporting scant flow -
moving on air. The 30Y spd is still off recent highs (inverted) not seen since
September 2015. Last week, the long end gapped wider following the refunding
annc w/(TBAC) agreed the Tsy should bill and note issuance in the short end
(2-5s), while long end issuance should hold steady. With this week's Tsy supply
and decent pick-up in corp issuance, desks looking/waiting for spds to narrow
before entering wideners at better levels. Recent flow includes rate paying in
2s around 1.8395% and 2s5s spd flatteners. Latest spread levels:
* 2Y +0.00/20.69
* 5Y +0.25/7.62
* 10Y +0.38/-2.12
* 30Y +1.12/-25.88
OUTLOOK: *** Data/speaker calendar (prior, estimate):
- Nov 08 03-Nov MBA Mortgage Applications (-2.6%, --) 0700ET
- Nov 08 03-Nov crude oil stocks ex. SPR w/w (-2.44M bbl, --) 1030ET
- Nov 08 Oct Kansas City Fed LMCI (0.50, --) 1100ET
- Nov 08 US Tsy $23.0B 10-Year Note auction 1300ET
Eurodollar/Treasury option summary
* +25,000 Jan 85/86 1x2 call spds, cab
* -10,000 Sep 77/80/82 put trees, 10.0
* -30,000 Red Dec'18 78/83 put over risk reversals, 3.0
* 12,000 Blue Mar 80/82 1x2 call spds, 1.5
* 5,000 short Dec 82/83call spds, 0.5 vs. 98.06.5/0.07%,
* +40,000 Jan 83 calls, 2.0
* 4,000 short Mar 81/Blue Mar 80 call spds, 0.50
* 5,000 short Dec 78/80 put spds, 2.0
* 10,000 short Dec 78/82 put spds, 19.0 vs. 20,000 short Dec 81 calls, 2.5
* 20,000 short Dec 82/83 call strip, 1.0 vs.
* 10,000 Blue Mar 80/82 1x2 call spds, 1.0
* 5,000 short Dec 82/83 call spds, 0.5
* +30,000+ Blue Mar 72/75 put spds, 4.0
* +5,000 Dec 85 calls, 1.5
* -6,000 Green Dec 77 puts, 2.5
* -3,100 short Dec 81 straddles, 11.5 and offered
* +/-4,500 Blue Nov 76/78 risk reversals, 0.0 ahead Fri's expiration
* 2,000 Dec 86 calls, 0.5 vs. 98.49
* 2,500 wk3 TY 126 calls, 5/64 vs. 125-11
* 2,000 TYZ 125.5 straddles, 46/64 vs. 125-11/0.16%
* 1,000 TYG 123 puts, 13/64 vs. 125-01
* 1,000 USZ 154.5 calls, 52/64 vs. 154-12/0.48%
* 1,000+ TYZ 125.25 straddles, 45/64
* 2,300 TYZ 122.25/123 2x1 put spds, 0.0
* 550 USZ/USF 156 2x1 put spds, 3/64
* +2,500 FVF 118 calls, 5/64
--MNI New York Bureau; tel: +1 212-669-6432; email: email@example.com
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