US TSYS: RISK-OFF UNWIND STRETCHED AS GEOPOL RISK REMAINS

US TSY SUMMARY: Second half trade so quiet since the 3Y auction tailed, easy to

overlook that Tsy futures have finally broken range, extending session lows, yld

curves bear steepening again. Not a risk-on moment w/equities weaker (ESH0 -6.0)

and Gold higher (+4.06), Tsys partially pressured by second day of heavy

deal-tied hedging. While underlying geopol risk remains lack of visible

retaliation/further offensive moves is spurring some unwinding safe haven

support.

- Second consecutive session of better than expected corporate issuance: $17.85B

total, $45.5B two-day total generated decent hedging flows, swap-tied paying.

Tsy futures Block sale: -5,000 FVH 118-31.5, sale through -31.75 post-time bid.

- US Tsy $38B 3Y Note auction (912828Z29) tailed: awarded 1.567% (1.632%

previous) vs. 1.562% WI, bid/cover 2.45 vs. 2.56 previous. Indirects drew 47.50%

vs. 49.08% prior, directs w/ 16.75% vs. 23.83% prior, dealers w/ 35.75% vs.

27.09% prior.

- The 2-Yr yield is down 0bps at 1.5444%, 5-Yr is up 1.3bps at 1.6188%, 10-Yr is

up 1.8bps at 1.8265%, and 30-Yr is up 2.1bps at 2.3066%.

TECHNICALS: 

US 10YR FUTURE TECHS: (H0) Bullish Focus Remains In Place  

*RES 4: 130-28+ High Oct 11

*RES 3: 130-17+ High Nov 1   

*RES 2: 130-04+ High Dec 3 and primary resistance

*RES 1: 129-21   High Jan 6

*PRICE: 129-09 @ 17:06 GMT, Jan 7

*SUP 1: 128-20   Low Jan 3

*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

Despite finding resistance at yesterday's high, 10yr futures maintain a bullish

outlook. Futures have recently breached 129-14, Dec 12 high. The break

undermines the recent bearish focus and signals scope for a climb towards

130-04+, Dec 3 high and the primary resistance. A break of this level would

represent a significant technical breach. First support has been identified at

128-20, Friday's low. A move through this support would open 127-29, Dec 13 low.

TSY FUTURES CLOSE: Similar to Monday, rates opened with a bid but gradually

reversed course as risk-off/safe haven support evaporated, yld curves bear

steepening. Update:

* 3M10Y  +2.220, 29.305 (L: 24.198 / H: 29.305)

* 2Y10Y  +1.758, 28.004 (L: 25.576 / H: 28.031)

* 2Y30Y  +2.094, 76.016 (L: 72.835 / H: 76.16)

* 5Y30Y  +0.947, 68.617 (L: 66.599 / H: 68.944)

Current futures levels:

* Mar 2-Yr futures down 0.125/32  at 107-25.375 (L: 107-24.875 / H: 107-26.625)

* Mar 5-Yr futures down 1.5/32  at 118-29.25 (L: 118-29 / H: 119-01.25)

* Mar 10-Yr futures down 3/32  at 129-5 (L: 129-04.5 / H: 129-12.5)

* Mar 30-Yr futures down 16/32  at 157-11 (L: 157-11 / H: 158-03)

* Mar Ultra futures down 30/32  at 183-28 (L: 183-27 / H: 185-04)

US EURODLR FUTURES CLOSE: Steady/mixed in the short end to near session

lows/narrow range out the strip. Current White pack (Mar'20-Dec'20):

* Mar 20 +0.005 at 98.280

* Jun 20 steady at 98.355

* Sep 20 steady at 98.430

* Dec 20 -0.005 at 98.450

* Red Pack (Mar 21-Dec 21) -0.025 to -0.005

* Green Pack (Mar 22-Dec 22) -0.025 to -0.02

* Blue Pack (Mar 23-Dec 23) -0.025 to -0.02

* Gold Pack (Mar 24-Dec 24) -0.020

US DOLLAR LIBOR: Latest settles

* O/N -0.0091 at 1.5279% (-0.0088/week)

* 1 Month +0.0069 to 1.6990% (-0.0152/wk)

* 3 Month +0.0058 to 1.8780% (+0.0042/wk)

* 6 Month -0.0137 to 1.8805% (-0.0123/wk)

* 1 Year -0.0004 to 1.9545% (-0.0096/wk)

US SWAPS: Spds reversed early narrowing around midday, finish on modest wides

after Mon's sharp narrowing on back of nearly $28B high-grade issuance and

better receiving on net. That said, near $18B high-grade supply issued Tuesday.

Two-way flow noted with better paying in fronts to intermediates in the second

half. Lighter swap-tied flow on the open: two-way in 5s, receiver in 7s

(1.6485), payer in 10s (1.7381%) into the NY open. Current spd levels:

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

Tue 1500    +0.88/+7.31    +0.38/-0.12   +0.44/-5.56    +0.38/-34.12

1300        +0.62/+7.06    +0.06/-0.44   +0.38/-5.62    +0.38/-34.12

1030        +0.00/+6.44    -0.31/-0.81   -0.31/-6.31    +0.00/-34.50

0900        +0.12/+6.56    -0.56/-1.06   -0.25/-6.25    -0.25/-34.75

Tue Open    +0.31/+6.75    -0.19/-0.69   -0.25/-6.25    -0.25/-34.75

Tue 0700    +0.38/+6.81    +0.06/-0.38   +0.00/-6.00    +0.00/-34.50

Mon 1500    -2.12/+6.50    -2.50/-0.56   -2.38/-6.00    -3.31/-34.56

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

* Daily Effective Fed Funds Rate: 1.55%, volume: $77B

* Daily Overnight Bank Funding Rate: 1.54%, volume: $178B

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

* Secured Overnight Financing Rate (SOFR): 1.55%, $1.034T

* Broad General Collateral Rate (BGCR): 1.52%, $384B

* Tri-Party General Collateral Rate (TGCR): 1.52%, $357B

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

08-Jan 0700 03-Jan MBA Mortgage Applications (-5.3, --)

08-Jan 0815 Dec ADP private payrolls (67k, 160k)

08-Jan 1000 Fed Gov Brainard, Community Reinvestment Act, DC, Q&A

08-Jan 1030 03-Jan crude oil stocks ex. SPR w/w

08-Jan 1300 US Tsy $24B 10Y note (912828YS3) reopen auction

08-Jan 1500 Nov consumer credit ($18.908B, $16.00B)

PIPELINE: Multiple post-Tsy auction launches; waiting on Bank of Nova Scotia,

Santander Chile

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

01/07 $2.25B #Bank of Nova Scotia $1B 3Y +43, $1.25B 5Y +62

01/07 $2B #Standard Chartered 6NC5 fix/FRN +120

01/07 $1.75B #American Honda Fnc $850M 3Y +40, $400M 3Y FRN +37, $500M 7Y +63

01/07 $1.4B #Air Lease $750M 5Y +90, $650M 10Y +142

01/07 $750M #Santander Chile 5Y +108

01/07 $600M #Public Service Electric & Gas $300M each: 10Y +65, 30Y +85

01/07 $350M #Eversource 30Y +115

01/07 $4B *EIB 5Y +9

01/07 $2B *Codelco $1B each: 10Y +135, 30Y +165

01/07 $1.5B #American Tower $750M each: 5Y +80, 10Y +112.5

01/07 $750M *Kommunalbanken 2Y L+8

01/07 $500M *Autodesk WNG 10Y +105

----

Whopping $27.7B total priced Monday from unexpectedly large 18 issuers

01/06 $3B *Enterprise Products Op (EPD) $1B each: 10Y +100, 31Y +145, 40Y +170

01/06 $2.4B *Ford Motor Credit $1.5B 3Y +153, $900M 7Y +255

01/06 $2B *MetLife Global Funding, $1B each: 3Y +40, 3Y FRN SOFR+57

01/06 $2B *Home Depot $750M 10Y tap +62, $1.25B 30Y +90

01/06 $2B *BNP Paribas 11NC10 +125

01/06 $1.75B *Ntnl Australia Bank (NAB) $750M 3Y +43, $1B 3Y FRN L+41

01/06 $1.25B *GM Financial 5Y +132

01/06 $1.25B *Santander UK, 3Y +57

01/06 $1.25B *BPCE 5Y +90

01/06 $2.5B *Sumitomo Mitsui Fncl Grp ("SMFG") $1.25B each: 5Y +75, 10Y +95

01/06 $1.1B *John Deere Cap $550M 5Y +45, $550M 10Y +65

01/06 $1B *Export-Import Bank of India 10Y +150

01/06 $900M *Duke Energy $500M 10Y +68, $400M 30Y +88

01/06 $750M *Kroger 30Y +170

01/06 $650M *Southern California Gas 10Y +77

01/06 $600M *Southern California Edison $100M tap 10y +90, $500M 30Y +140

01/06 $2.55B #Mexico $1.75B +10Y +150, $800M 2050 Tap +175

01/06 $750m #Banco Del Estado de Chile 5Y +110

Eurodollar/Tsy options 

Eurodollar options:

* +15,000 Jun/short Jun 83 put spds, 1.0

* +6,000 Sep 82/83 2x1 put spds, 2.5

* +3,000 Feb 82 straddles, 7.0

* +3,000 Mar 82 straddles, 8.5

* Update, total +10,000 short Feb 88/90 call strip, 3.0

* +8,500 Red Mar'21 80/82/83 put trees, 1.0

* 6,000 Mar 85/87/90 call flys, 0.5

* -1,500 short Mar 85 straddles, 21.0

* 1,250 Blue Mar 82 puts, 3.5 vs. 98.42

* +12,000 Apr 85/87/90 call flys .75 over Apr 81/82 put spds

* +8,000 short Feb 88/90 call strip, 3.0

* +3,000 Apr 82 puts, 1.5

Earlier screen flow

* +4,000 Apr/Jun 82 put spds, 1.25

* 15,000 Green Sep 97 calls

* 9,000 Green Sep 100 calls

* 4,500 Green Sep 95 calls

* total +10,000 pit/screen Jun/Sep 82/83 put spd spd, 1.0 net/Jun over

Overnight recap

* 40,000 Apr 86/87 call spds

* 20,000 Mar 83/86 1x2 call spds

* Blocks, total +20,000 Dec 86/88/90 broken call trees, 0.0

* 3,000 Jun/Sep 82/83 put spd spd

* 6,200 short Feb 86 calls, 5.5

* 3,500 short Feb 82 puts, 1.0

Reminder, January Eurodollar serial options expire Friday (lead serial options

expire Mon morning at 6:00 am ET while Red through Purple midcurves expire at

5:00 pm ET Fri). Preliminary OI coming into session according to CME Group Data

below:

-- Jan serial OI: 1,114,403 (757,344 calls, 357,059 puts);

-- Jan 1yr midcurve (Red) OI: 807,396 (422,327 calls, 385,069 puts);

-- Jan 2yr midcurve (Green) OI: 318,650 (162,937 calls, 155,713 puts);

-- Jan 3yr midcurve (Blue) OI: 141,392 (93,938 calls, 47,454 puts);

-- Jan 4yr midcurve (Gold) OI: 33 (33 calls, 0 puts);

A scant total of 2,381,874 options (1,267,471 midcurves) coming off the sheets

compared to prior December quarterly expiration where a whopping total of

17,188,942 options expired.

Tsy options:

apparently rolling shorts up

* +9,500 FVG 119.5/120 call spds, 4/64 on screen

* +2,700 TYH 132 calls, 8/64 vs. 129-11/0.10%

Earlier trade includes

* -5,000 TYH 131 calls, 15/64

* 2,100 TYH 127 puts vs. TYG 128.25 puts, 0.0 net

* +4,500 FVG 119.25 calls, 9.5/64

* -1,400 FVG 119 straddles, 33.5/64

* +11,500 pit/screen FVG 118.5/119.5 call over risk reversals, 2/64 vs.

119-00.2/0.43%

Earlier screen highlights:

* +20,000 TYG 130 calls, 13/64

* +8,000 TYH 130 calls, 29/64

* +6,000 TYG 127 puts, 1/64

* +3,400 TYJ 126 puts, 9/64

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

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