US TSYS: Relative Mild Risk-On, 75Bp Cut Still Exp From FOMC

US TSY SUMMARY: Headlines ruled market (and lack of data and Fed speakers). Tsys

extended session lows after closing bell on hopes of bipartisan stimulus to

combat COVID-19 effect on economy (after Tsy Sec Mnuchin and House speaker

Pelosi meeting), 10YY 0.7951% vs. 0.5621 low, 30YY 1.3086% vs. 1.0100% low; huge

swing in yld curves: bear steepening. Equities ground back near early highs

emini +130.0.  

- Second half Trump/Pence headlines re: virus mitigation helped take air out of

midday risk-off move: "PENCE: INSURERS AGREED TO WAIVE ALL COPAYS FOR VIRUS

TESTS" Bbg. Two headlines triggered midmorning risk-on unwind: "VIRUS IS

`CLEARLY A MASSIVE GLOBAL OUTBREAK,' REDFIELD SAYS" Bbg; "U.S. BEYOND VIRUS

CONTAINMENT IN SOME AREAS, REDFIELD SAYS" Bbg.

- Swap spds collapsed, 2Y inverting vs. 5Y amid consistent if not heavy

receiving across the baord. US Tsy $38B 3Y Note auction (912828ZD5) tailed:

awarded 0.563% (1.394% last month) vs. 0.535% WI, bid/cover 2.20 vs. 2.56

previous. 

- The 2-Yr yield is up 14.3bps at 0.5243%, 5-Yr is up 18.4bps at 0.6609%, 10-Yr

is up 24.5bps at 0.7856%, and 30-Yr is up 30bps at 1.2948%.

TECHNICALS:

US 10YR FUTURE TECHS: (M0) Defines A Top, For Now At Least

*RES 4: 141-21   3.236 projection of Jan 9 - Feb 3 rally from Feb 6 low

*RES 3: 140-26   3.00 projection of Jan 9 - Feb 3 rally from Feb 6 low

*RES 2: 140-24   High Mar 9 and bull trigger 

*RES 1: 139-13   Intraday high 

*PRICE: 138-09 @ 16:26 GMT, Mar 10

*SUP 1: 136-15   Low Mar 6  

*SUP 2: 135-12+ Low Mar 5 and key near-term support

*SUP 3: 134-09   Low Mar 3

*SUP 4: 134-05+ 20-day EMA

Treasuries futures are sharply lower having staged an impressive pullback off

the Monday high of 140-24. The strong uptrend has been in overbought territory

for some time and perhaps now we can consider the start of a much needed

technical correction. A move below Friday's 136-15 low would suggest scope for

135-12+, the Mar 5 low. A deeper pullback would open 134-05+, the 20-day EMA.

Initial resistance is at 139-13, the bull trigger is 140-24.

AUSSIE 10-YR TECHS: (H0) Still Elevated

*RES 3: 99.5467 - 3.0% Upper Bollinger Band

*RES 2: 99.5000 - Psychological Resistance

*RES 1: 99.4800 - High Mar 06 and Alltime High

*PRICE: 99.3150 @ 16:32 GMT, Mar 10

*SUP 1: 98.7150 - Low Jan 14 and key near-term support 

*SUP 2: 98.5900 - Low Jan 3 

*SUP 3: 98.5700 - Low Jan 2 and primary support

Aussie bonds are a touch firmer Tuesday once again, but moderated in short order

as sentiment settled slightly. Upside targets remain at vol band resistance of

99.5467. To the downside, the initial focus is on 98.7150, Jan 14 low where a

break is required to signal a fresh round of stronger bearish pressure.

JGB TECHS: (H0): Clears 2019 High

*RES 3: 157.32 - 2.0% 10-dma envelope

*RES 2: 156.00 - Handle Resistance

*RES 1: 155.89 - High Mar 9

*PRICE: 154.56 @ 16:37 GMT, Mar 10

*SUP 1: 152.79 - 50-dma

*SUP 2: 151.62 - Contract lows, Dec 20

*SUP 3: 151.11 - 76.4% retracement of August 2018 - September 2019 Rally

JGBs followed the global bond market lower Tuesday, but near-term support lines

remain untested for now. The recent rally saw the mid-2019 highs taken out,

firming the outlook which still points higher. This keeps the over-arching theme

materially bullish, with momentum measures also pointed higher. Near-term

resistance sits at, initially, 155.89 ahead of the 2.0% 10-dma envelope at

157.32. The 200-dma switches to support at 153.55.

TSY FUTURES CLOSE: Tsys extend session lows after the bell on hopes of

bipartisan stimulus to combat COVID-19 effect on economy (after Tsy Sec Mnuchin

and House speaker Pelosi meeting), equities higher but off early levels emini

+90.0. 10YY 0.7603% vs. 0.5621 low, 30YY 1.2633% vs. 1.0100% low; huge swing in

yld curves -- bear steepening. Update: 

* 3M10Y  +16.039, 32.363 (L: 10.905 / H: 33.98)

* 2Y10Y  +13.249, 28.789 (L: 13.39 / H: 29.184)

* 2Y30Y  +18.577, 79.417 (L: 57.285 / H: 79.642)

* 5Y30Y  +12.777, 64.219 (L: 47.448 / H: 64.263); Current futures levels:

* Jun 2-Yr futures down 9.125/32 at 109-29.625 (L: 109-27.5 / H: 110-07.125)

* Jun 5-Yr futures down 1-1.75/32 at 124-6.75 (L: 124-03.25 / H: 125-06.5)

* Jun 10-Yr futures down 2-01/32 at 137-13.5 (L: 137-03.5 / H: 139-13.5)

* Jun 30-Yr futures down 6-18/32 at 179-01 (L: 178-25 / H: 186-13)

* Jun Ultra futures down 14-28/32 at 219-23 (L: 217-16 / H: 235-19)

US EURODLR FUTURES CLOSE: Well offered across the strip all day, short end only

scales portion of Mon's move (ergo, another 75bp rate cut expected from FOMC

next week) while Greens-Golds reverse more than twice Mon's move. Current White

pack (Mar'20-Dec'20): 

* Mar 20 -0.045 at 99.203

* Jun 20 -0.045 at 99.510

* Sep 20 -0.050 at 99.540

* Dec 20 -0.070 at 99.50

* Red Pack (Mar 21-Dec 21) -0.14 to -0.08

* Green Pack (Mar 22-Dec 22) -0.195 to -0.155

* Blue Pack (Mar 23-Dec 23) -0.23 to -0.205

* Gold Pack (Mar 24-Dec 24) -0.26 to -0.235

US DOLLAR LIBOR: Latest settles

* O/N +0.0009 at 1.0820% (+0.0023/week)

* 1 Month +0.0865 to 0.8114% (-0.0512/wk)

* 3 Month +0.0160 to 0.7841% (-0.1119/wk)

* 6 Month +0.0343 to 0.7696% (-0.1101/wk)

* 1 Year +0.0486 to 0.7921% (-0.0535/wk)

US SWAPS: Spd collapse directional with rise in Tsy ylds Tuesday, accelerated

into the close w/2Y inverting vs. the 5Y spd. Carry-over fast$ receivers in

short end early, better real$ receiving in 5s-10s, bank portfolio receiving in

30s. Current spd levels:

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

Tue 1500   -3.75/+5.00    -2.44/+5.81   -4.00/+4.00    -6.00/-40.50

Tue Open   -1.38/+7.38    -4.62/+3.62   -4.94/+3.06    -6.75/-41.25

Mon 1500   +1.75/+14.62   -0.50/+12.00  +3.00/+10.75   +2.25/-31.00

Mon Open   +6.62/+19.50   +2.38/+14.88  +3.75/+11.5    +3.00/-30.25

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

* Daily Effective Fed Funds Rate: 1.09%, volume: $77B

* Daily Overnight Bank Funding Rate: 1.08%, volume: $178B

US TSYS: REPO REFERENCE RATES:

* Secured Overnight Financing Rate (SOFR): 1.09%, $1.256T

* Broad General Collateral Rate (BGCR): 1.08%, $496B

* Tri-Party General Collateral Rate (TGCR): 1.08%, $468B

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

11-Mar 0700 06-Mar MBA Mortgage Applications (15.1%, --)

11-Mar 0830 Feb CPI (0.1%, 0.0%)

11-Mar 0830 Feb CPI Ex Food and Energy (0.2%, 0.2%)

11-Mar 1030 06-Mar crude oil stocks ex. SPR w/w

11-Mar 1400 Feb Treasury budget balance (-$234.0B, -$236.8B)

PIPELINE: JP Morgan lead issuance, waiting to price

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

03/10 $2.25B #JP Morgan 6NC5 +145

03/10 $1.75B *Starbucks $500M 7Y +140, $750M 10Y +165, $500M 30Y +225

03/10 $550M *Duke Energy Indiana WNG 30Y +165

03/10 $650M *Textron 10Y +237.5

Canadian issuance

03/10 C$Benchmark TD 30Y +145a

Eurodollar/Tsy options 

Eurodollar options:

* +10,000 Green Sep 95/96/97 call flys, 1.5

* -25,000 Jun 92/95 call spds vs. short Jun 95/97 call spd, 10.0 net cr bull

curve flattener

* 16,500 Apr 90/92 put spds, 1.5

* 2,500 short May 95/96/97 call trees, 2.5

* Update, total +50,000 Apr 96/97 call spds, 2.75

* Update, over +32,000 Apr 92 puts, 2.0

* +20,000 Apr 92 puts, 2.0 vs. 99.54/0.12%

* 4,000 Sep 100 calls 0.5

* 3,000 Sep 97/100 1x2 call spds, 1.5

* +20,000 Apr 96/97 call spds, 2.75

* 15,000 Jul/Sep 97 call spds, 0.5

* 5,000 Apr/May 90 put spds, 0.5

* >+20,000 Jun 100 calls, cab pit/screen earlier

* Update, total +10,000 Jun 97/100 call spds, 1.0

* Update, total +35,000 Sep 96/97 call spds, 11.5

* -21,500 Jun 92/95/97 call flys, 9.0

* +11,000 Jun 100 calls, cab

* +2,000 Jun 95/97 1x2 call spds, 9.0

* 1,000 Sep 93/95/97/98 call condors, 8.0

* +4,000 short Mar 95 calls, 10.0 vs. 99.57/0.70% earlier

Not surprisingly, implieds came in hard as underlying retraced overnight and as

a result of tactical vol sales, vols off lows as futures bounced on earlier

headlines re: admin not ready to roll out stimulus. As long as COVID-19 remains

threat, expect implied vol to remain elevated vs. historicals, however. "Markets

can stay irrational longer than you can stay solvent," Keynes.

* Update, total -23,500 Apr/May 87 puts strips w/-11,750 Apr 95 calls, 11.5

* -7,000 Apr/May 87 puts strips w/-3,500 Apr 95 calls, 11.5

* +5,000 short Mar 95 calls, 10.0 vs. 99.57/0.70%

* 2,000 Sep 93/96 call spds, 17.0

* 2,500 Jun 82/86 put spds 0.5 vs. short Jun 5/88 1.0

Much more moderate volume overnight, just over 225k options

so far, salient flow includes

* 25,000 Sep 90/92/95 call flys

* 4,000 Mar 91/92/93 call flys

* 6,000 short Mar 91 puts, 0.5

Block recap

* total -15,000 Apt 92/95 call spds, 20.5 vs. 99.52/0.30% from 0727-0756ET

* -10,000 Jun 93/95 call spds, 9.0 at 0342:56ET

Tsy options:

Block, 1535:29ET

* 10,000 TYM 134.5/140.5 strangles, 2-0/64

* +5,000 TYM 126.5 calls, 39/64

Flurry 5Y w/paper reaching for OTM May puts

* +25,000 FVK 116 puts, 1.5/64 pit/screen

* +15,000 FVK 115 puts, 1.5/64

* +2,500 TYK 134/141 put over risk reversals, 49/64 vs. 138-00/0.42%

* +2,500 USJ 175.5 calls, 8-10 to 8-40/64

* +3,000 USM 177 puts, 3-40- to 3-49/64

* +5,000 TYM 130 puts, 8/64 vs. 138-04

* scale seller near -9,000 FVK 124.5 puts, 52/64 to 45/64

Block, 0824:05ET

* 8,000 TYM 137 calls, 2-45/64 vs. 137-26/0.57%

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

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