US TSYS: PARTIAL US GOV SHUTDOWN/REOPEN TEMPORARY

US TSY SUMMARY: Rates drifting near low end session range by the close, average

futures volume (TYH>1.2M), yld curves mildly flatter for the most part. SPX near

midmorning highs at 2665.5 vs. 2672.5H; US$ index broadly lower (DXY -.790,

95.811). Many citing WSJ article re: earlier than expected balance sheet runoff

end for US$ weakness.

- Very quiet data day w/StL and NY Fed Nowcasts. Fed remains in blackout through

next Wed's FOMC policy annc (no rate move exp, % of hikes remain low: sub-25%

through summer). 

- Quiet two-way trade w/better selling on net in belly early, real$ buying

second half. Trade practically halted going into, and after Pres Trump annc of

temporary (3 wk) end to US Gov partial shutdown. Selling across the curve did

accelerate upon initial annc that Pres Trump would speak, but then indifference

as solution kicked down the road -- 2nd shutdown may occur after Feb 15 if

border funding not available according to pres. 

- Tsy cash/ylds: 2Y 99-25.5 (2.606%), 5Y 100-03.5 (2.599%), 10Y 103-03.5

(2.758%), 30Y 105-31.5 (3.066%).

MONTH-END EXTENSIONS: *** Preliminary Bloomberg-Barclays US month-end index

extension/forecast summary compared to the average increase for the past year

and the same time in 2018; TIPS 0.11Y; Govt inflation-linked, 0.14Y

*.....................Projected...1Y Avg Incr..Last Jan

*US Tsys.................0.06........0.08........0.07

*Agencies................0.06........0.10........0.05

*Credit..................0.12........0.09........0.08

*Govt/Credit.............0.08........0.08........0.07

*MBS.....................0.06........0.07........0.07

*Aggregate...............0.08........0.08........0.07

*Long Govt/Credit........0.05........0.09........0.07

*Interm Credit...........0.08........0.08........0.08

*Interm Govt.............0.07........0.08........0.06

*Interm Govt/Cred........0.06........0.08........0.08

*High Yield..............0.02........0.08........0.10

US TSY FUTURES CLOSE: Weaker all day, but off session lows by the bell, curves

mildly flatter. Very little trade in last half hour -- not much of mkt react to

temporary 3-week govt reopen. Curves holding around steady, update:

* 2s10s -0.059, 14.882 (14.076L/16.110H);

* 2s30s -1.166, 45.602 (45.460L/47.700H);

* 5s30s -1.651, 46.559 (46.220L/48.566H);

Current futures levels:

* Mar Ultra bonds down 26/32 at 159-16 (159-11L/160-15H)

* Mar 30-yr Bond futures down 24/32 at 145-01 (144-29L/145-27H)

* Mar 10-yr futures down 12.5/32 at 121-11.5 (121-11L/121-25H)

* Mar 5-yr futures down 7.5/32 at 114-05.25 (114-04.75L/114-13H)

* Mar 2-yr futures down 2.75/32 at 105-28.62 (105-28.62L/105-31.38H)

US EURODLR FUTURES CLOSE: Weaker across the strip, just off session lows.

Current White pack (Mar'19-Dec'19):

* Mar'19 +0.000 at 97.315

* Jun'19 -0.005 at 97.280

* Sep'19 -0.025 at 97.265

* Dec'19 -0.025 at 97.235

* Red pack (Mar'19-Dec'20) -0.045-0.050

* Green pack (Mar'20-Dec'21) -0.055-0.050

* Blue pack (Mar'21-Dec'21) -0.055-0.050

* Gold pack (Mar'22-Dec'22) -0.050

US DOLLAR LIBOR: Latest settles,

* O/N +0.0002 to 2.3847% (+0.0009/wk)

* 1 Month -0.0018 to 2.5000% (-0.0060/wk)

* 3 Month -0.0131 to 2.7516% (-0.0094/wk)

* 6 Month -0.0179 to 2.8322% (-0.0197/wk)

* 1 Year +0.0024 to 3.0315% (+0.0014/wk)

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

* Secured Overnight Financing Rate (SOFR): 2.41%, $994B

* Broad General Collateral Rate (BGCR): 2.40%, $459B

* Tri-Party General Collateral Rate (TGCR): 2.40%, $433B

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

28-Jan 1030 Jan Dallas Fed manufacturing index (-5.1, --)

28-Jan 1130 US TSY $39B 26W bill auction (912796SB6)

28-Jan 1130 US TSY $40B 2Y note auction (9128285X4)

28-Jan 1300 US TSY $42B 13W bill auction (912796RJ0)

28-Jan 1300 US TSY $41B 5Y note auction (9128285Z9)

PIPELINE: No New issuance Friday

Eurodollar/Treasury Option Summary 

Eurodollar options, Pit/screen:

* +10,000 Red Mar20 73/77/80 call flys, 7.0

Block, 1220:30ET,

* +10,000 short Feb 73 calls at 4.0 vs. 97.325/0.38%

* +13,000 short Jun 83/86 call spds, 0.5 vs. 97.345

Additional morning flow includes

* +15,000 Red Mar20 85/90 call spds, 1.5

* +16,000 Jun 76/77 call spds, 0.5

* +5,000 short Apr 70/72/73 put flys, 0.5

* over 17,000 Dec 72 straddles, 33.5 (pit/screen/block)

* Update, over +5,000 short Mar 72/73/75 call trees, 2.5

Block, 1126:30ET, more bought in pit as well

* +11,250 Blue Dec 73 straddles, 51.0

* 10,000 (pit/screen) Sep 76 calls 2.5 over the Dec 71/73 1x2 call spd

* 2,000 short Mar 72/73/75 call trees, 2.5 vs. 97.345

* +8,000 short Jun 83/85/86 2x1x1 call trees, 1.0

* +5,000 Jun 76/77 call spds w/ short Mar 72/73/75 call trees, 2.75 total db

* -2,000 Red Mar 66/67 put strip, 5.0 vs. 97.345

Block, 0849:13ET, more in pit

* -10,000 Dec 72 straddles, 33.5

Large screen trade hedging end of tightening cycle

* +50,000 short Apr 70/72/73 broken put flys, 0.5 -- opener -- position build

where end of Reds (2020) price in less than one 25bp hike (EDM0 currently

97.37).

* 6,000 short Feb/Blue Feb 73 straddle spds, 0.0

* -2,500 Green Feb 73/75 strangles, 8.5

Tsy options, Pit/screen:

* 5,750 TYH 120.5/121 put spds, 10/64 vs. 121-10.5/0.15%

Block, 1137:44ET, another 5k bought in pit

* +10,000 Dec 87 calls, 0.5

* +67,850 total TYH 126.5 calls at 1/64 -- continues to chip away at offer

* -4,000 FVH 115.25 calls on screen at 3.5/64

* +3,000 TYJ 121.5 puts, 35/64 vs. 121-26.5

US TSY OPTIONS: Reminder, Feb serial ops expire today. Ops 0.5 tic ITM (0.25 tic

for 5-, 2-yr opt's) auto-exercised. If futures vary much post-set, traders have

until 1900ET to notify clearing intention to abandon option that would normally

be exercised, some dealers require earlier notice. According to CME Group data:

*             Calls     Puts      Total   Nearest-the-Money Strike Totals

* Feb 30yr   213,599  313,130    526,729  144.50 w/ 13,320 (1,971c, 11,349P)

*                                         145.00 w/ 14,587 (8,606c, 5,981P)

*                                         145.50 w/ 8,989 (4,243c, 4,746P)

* Feb 10yr 1,049,697  990,631  2,040,328  121.25 w/ 43,960 (10,595c, 33,365p)

*                                         121.50 w/ 201,904 (136,582c, 65,322p)

*                                         121.75 w/ 38,135 (21,158c, 16,977P)

* Feb 5yr    328,361  491,189    819,550  114.00 w/ 62,670 (32,873c, 29,797p)

*                                         114.25 w/ 39,807 (25,400c, 14,407p)

*                                         114.50 w/ 69,604 (32,892c, 36,712p)

* Feb 2yr     51,827   56,856    108,683  105.88 w/ 7,587 (2,246c, 5,341p)

*                                         106.00 w/ 9,816 (4,881c, 4,935p)

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

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