US TSYS OFF: SAFE-HAVEN ON SUBWAY BLAST;3Y,10Y AUCTNS PRESSURE

     US TSYS SUMMARY: Treasuries end Mon mainly weaker after early safe-haven

bid on terror fear amid NYC subway bomb blast that hurt 4, including suspect.

Once suspect arrested, and police checks showed no other problems, Tsys lost

safe-haven bid. 

- Tsy declined in afternoon: post-auction sales, soft $20B 10Y reopening auction

(tailed to 2.384% rate, 2.37 cover, soft 57.2% indirect, 8.37% directs, mildly

large 34.4% dealers.) 

- Tsy had good $24B 3Y auction: 1.932 rate, good 59.1% indirect, avg 7.4%

direct, left only relatively small 33.56% dealers. Tsys late morning

sales/shorts as subway normalized. No react to midmorning BLS jobs data. Mkt on

hold for Wed FOMC mtg: 25bp rate hike expected, SEP nod to four 2018 hikes. 

- US EURODLR FUTR: Decent short end seller after higher LIBOR set; big 66k buy

EDZ8/EDZ9 followed. Buyer of 15K TUH 2Y Tsy futrs at 107-05.25; flatteners in

2Y, 3Y, 5Y vs. 10Y, 30Ys. Mild deal-tied hedges; light high-grade corp issuance.

Sellers in 5Y, 30Y Tsys. Late Eurodlr futures seller of 15,000 EDZ7s at 98.40.

- TSYS 3PM ET: 2Y 1.823%, 3Y 1.937%, 5Y 2.157%, 7y 2.298%, 10Y 2.387%, 30Y

2.772%

FED: Markets are fully expecting a rate hike from the Fed at this Wednesday's

policy announcement while early 2018 rate hike probability levels holding stable

(MNI PINCH): 

* Dec 13 FOMC: 100% 

* Jan 31 FOMC: 61.0% for hike after Dec annc 

* Mar 21 FOMC: 69.7% for Dec hike/no-go at January annc 

* May 2 FOMC: 46% for hike after Dec and March annc 

* Jun 18 FOMC: 52.6% for hike after Dec and March annc, no-go at May FOMC

US TSY FUTURES CLOSE: Trading mixed into the close, risk-off/safe-haven support

waning late as equities trade stronger (emini +7.0, 2661.0) and US$ inches

higher. Current futures levels: 

* Mar Ultra bonds up 6/32 at 166-26 (166-21L/167-24H) 

* Mar 30-yr Bond futures up 5/32 at 153-01 (152-28L/153-19H) 

* Mar 10-yr futures down .5/32 at 124-08 (124-08L/124-17.5H) 

* Mar 5-yr futures down 1.75/32 at 116-10 (116-09.75L/116-16.25H) 

* Mar 2-yr futures down 1.25/32 at 107-04.25 (107-04L/107-06.75H)

US EURODLR FUTURES CLOSE: Lower across the strip by the bell. After early

risk-off/safe-haven support following NY subway bombing ahead the open, futures

have slipped to late session lows. Late selling EDZ7, 98.400. Current White pack

(Dec'17-Sep'18): 

* Dec'17 -0.002 at 98.400 

* Mar'18 +0.000 at 98.240 

* Jun'18 -0.010 at 98.080 

* Sep'18 -0.020 at 97.985 

* Red pack (Dec'18-Sep'19) -0.020 

* Green pack (Dec'19-Sep'20) -0.015-0.025 

* Blue pack (Dec'20-Sep'21) -0.010-0.020 

* Gold pack (Dec'21-Sep'22) -0.010-0.015

US SWAPS: Spd curve reversed early flattening to steeper from midday on. Modest

spd flow with modest two-way corporate deal and Tsy supply hedges/unwinds.

Modest receiving in 2s and 3s after decent $300M rate payer in 5s from

2.0625-2.2075, $178k 2Y-7Y-10Y Fly, paying the belly. OTC vol steady to mixed --

1M10Y vol w/mild bid still after early Monday NY subway explosion. Latest spread

levels: 

* 2Y -0.88/19.12 

* 5Y +0.12/6.38 

* 10Y +0.12/+1.25 

* 30Y +0.56/-19.75

US PIPELINE: High-grade corporate bond issuance for Monday:

-

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

12/11 $500M #Packaging Corp of America Baa2/BBB 3Y +55 DB/WFS

12/11 $500M #Packaging Corp of America Baa2/BBB 10Y+105 DB/WFS

12/11 $1.0B #Santander Hldngs Baa3/BBB/BBB+ 5Y+130 BARC/JPM/SANT/WFS

12/11 $250M #Santander Hldngs " Tap 4.4% 2027:+170 BARC/JPM/SANT/WFS

12/11 TBD Kor.Elec.Pwr Corp. Aaa2/AA/AA- 11/3 wk meetgs BAML/C/CA

12/11 TBD Lebanon delayed Eurobond from Nov., said MOF

12/11 TBD Israel Electric Baa2/BBB US meetings Oct.30-Nov3 JPM

12/11 TBD Hanjin Bank: Potentl US$ deal w/ KEXIM Guar? BNP/DAIWA/GS

1/02 BM Philippines Baa2/BBB/BBB- 1st week Jan bd: C/CS/DB/MS/SCB

12/11 TBD Quatar eyed $9B in international bonds; no time yet

12/11 BM Korea Southern Pwr Aa2/AA- 11/29-12/5 mtgs BNP/C/HSBC/UBS

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

- Dec 12 Start of two-day FOMC policy meeting, Washington

- Dec 12 Nov NFIB Small Business Index (103.8, --) 0600ET

- Dec 12 Nov Final Demand PPI (0.4%, 0.3%) 0830ET

- Dec 12 Nov PPI ex. food and energy (0.4%, 0.2%) 0830ET

- Dec 12 Nov PPI ex. food, energy, trade (0.2%, --) 0830ET

- Dec 12 09-Dec Redbook retail sales m/m (-0.9%, --) 0855ET

- Dec 12 Nov Kansas City Fed LMCI (0.52, --) 1100ET

- Dec 12 US Tsy $12B 30Y Bond Reopening auction 1300ET

- Dec 12 Nov Treasury budget balance (-$63.2B, -$135B) 1400ET

Eurodollar/Treasury Option Summary

Eurodollar options, Pit/screen:

* 10,000 Jun 78/80 2x1 put spds, 2.0

* 3,900 Mar 81/82 2x1 put spds, 4.0

* Update, total +15,000 Apr 82/83 1x2 call spds, 0.75 vs. 98.10

* 5,000 Green Jun 75 puts, 8.5 vs. 97.695/0.32% earlier

* -2,000 Green Dec 77/Blue Mar 76 straddle spds, 17.5

* total -6,500 short Dec 78/80 4x1 put spds w/

* short Dec 76/77 4x1 put spds, 7.0-7.5

* +5,000 Red Dec 73/76 put spds, 3.5 vs. 97.90/0.10%

* +3,500 Blue Jan 72/Dec 85 strangle

* total -20,000 Feb 82/83 2x1 put spds 5.0 vs. 98.24/0.20%

* +5,000 Red Dec 73/76 put spds, 3.5 vs. 97.90/0.10%

* 4,500 (pit/screen) long Green Dec 67/75 2x1 put spds, 11.0 vs. 97.73

* +4,000 short Mar 81/82 call spds, 1.0 vs. 97.85

* +3,000 Gold Mar 78 calls vs. 6,000 short Mar 85 calls, 2.0 net debit

* Update, total 20,000 Feb 82/83 2x1 put spds 5.0 vs. 98.24/0.20%

* -10,000 Jun 78/80 put spds, 3.5 vs. 98.075/0.25%

* -2,750 short Feb 76/77 put strips 2.5 over the short Jan 77 puts

* 2,500 short Dec 78/80 3x1 put spds, 5.0

* -20,000 Feb 82/83 2x1 put spds 5.0 vs. 98.24/0.20%

* +3,000 Blue Jan 71/73 put spds 0.5 over the Blue Jan 80 calls

* +3,500 Blue Jan 72/Dec 85 strangle, 0.5

* +10,000 Green Jan 75 puts, 0.5 vs. -Green Feb 73/75 put spds, 1.0 vs.

* -20,000 short Feb 77 puts, 2.0 vs. 97.83/0.10%, 4.5 total cr

* 2,000 short Dec 78/80 2x1 put spds, 2.5

* 2,500 Jan 82/83 strangles, 3.75

* +2,000 short Feb 78/Green Feb 77 straddle spds, 3.5

* -5,000 (pit/screen) Red Dec'18 75/76/77 put flys, 1.0

* +2,250 Red Dec'18 72/75/77 put flys, 4.0

* -2,000 Jan 82/83 3x2 put spds, 17.5

* screen, 24,200 Dec 83 puts, cab -- OI in the put continues to decline in

strike ahead Fri's futures/options expiry, OI -77,235 on volume of 141,062 Fri.

* screen, 12,500 short Mar 76/77 3x2 put spds, outright and vs. short Mar 82

calls with volume in latter at 19,600

Tsy options, Pit/screen:

* 1,000 TYF 121/122/123 2x3x1 put flys, 1/64 net/wings over

* -1,000 USG 151/156 strangles, 1-19/64 to 1-18/64

* 2,500 TYG 123.5/125.5 strangles, 29/64

--MNI New York Bureau; tel: +1 212-669-6432; email: sheila.mullan@marketnews.com

[TOPICS: MTABLE,MNUEQ$,M$U$$$,MR$$$$,M$$FI$,MN$FI$]