US TSYS: RISK ON, RISK-OFF, RINSE AND REPEAT

US TSY SUMMARY: Tsys trade weaker after the bell, lower half of session range,

yld curves flattening w/intermediates underperforming (5s30 -3.103 at 38.232).

Rather muted day on deceptively heavy volume (TYH>1.67M). Risk-on/off/on

session, equities recover late after reversing early gains into midday. Headline

watching: Chuck and Nancy have school-yard spat w/Trump of border wall. GBP/US$

makes new lows after no-confidence vote threshold (>48 letters) for May met.

-  Salient data highlights for Wednesday (estimates): Nov CPI (.3% prior, 0.0%

estimate); $24B 10Y note auction. Tsy $38B 3Y note auction (9128285R7) tailed

slightly, awarded a 2.748% rate vs. 2.745% WI going into auction (2.983%

previous) w/bid/cover 2.59 vs. 2.54 previous (3.09 avg).

- 2Y swap spds narrow again,underlying factors remain: year end funding pressure

for banks w/higher LIBOR sets, forced liquidations and/or deleveraging chatter

on Risk-parity accts. Note, balance of spds wider, but appr 1.0 bps off highs as

well. Couple that with global political, trade and govy shut-down risks, and

long end inversion can easily leak back into 10Y spd. Tsy cash/ylds: 2Y 99-30.5

(2.750%), 5Y 100-19.25 (2.743%), 10Y 102-03.5 (2.877%), 30Y 104-26.5 (3.125%).

US TSY FUTURES CLOSE: Trading weaker after the bell, Ultra 10Y outperforming;

strong volume (TYH 1.61M); curves flatter; update:

* 2s10s -2.106, 10.695 (10.053L/13.520H);

* 2s30s -4.055, 35.748 (34.711L/40.123H);

* 5s30s -3.094, 38.244 (37.528L/41.679H);

Current futures levels:

* Mar Ultra bonds down 02/32 at 157-11 (156-24L/158-09H)

* Mar 30-yr Bond futures down 12/32 at 143-04 (142-30L/143-27H)

* Mar 10-yr futures down 08/32 at 120-13 (120-11.5L/120-24.5H)

* Mar 5-yr futures down 4.75/32 at 113-15.75 (113-14.5L/113-22.5H)

* Mar 2-yr futures down 02/32 at 105-20.75 (105-21L/105-23.75H)

US EURODOLLAR FUTURES CLOSE: Trading moderately lower, at/near bottom of range;

strong volume. Current White pack (DEC'18-SEP'19):

* DEC'18 -0.0075 at 97.1975

* MAR'19 -0.025 at 97.205

* JUN'19 -0.030 at 97.150

* SEP'19 -0.035 at 97.120

* Red pack (DEC'19-SEP'20) -0.060-0.040

* Green pack (DEC'20-SEP'21) -0.060-0.050

* Blue pack (DEC'21-SEP'22) -0.045-0.035

* Gold pack (DEC'22-SEP'23) -0.035

US DOLLAR LIBOR: Latest settles, 

* O/N +0.0001 to 2.1821% (+0.0013/wk)

* 1 Month +0.0118 to 2.4323% (+0.0321/wk) 

* 3 Month +0.0031 to 2.7790% (+0.0080/wk)

* 6 Month +0.0028 to 2.8806% (-0.0052/wk)

* 1 Year +0.0055 to 3.0895% (-0.0110/wk)

US SWAPS: ### POV: KEEP AN EYE ON FRONT END SWAP SPD

- May see repeat of yesterday's gap-tightening. Spds were wider across board

today (rebound after Mon's move where 2Y gapped more than 3bps tighter to June

2016 lvls). The 2Y spd now -.56 at 12.19 after widening as much as 1.25 bps in

first half.

- Potential underlying factors remain: year end funding pressure for banks

w/higher LIBOR sets, forced liquidations and/or deleveraging chatter on

Risk-parity accts. Note, balance of spds wider, but appr 1.0 bps off first half

highs as well. Couple that with global political, trade and govy shut-down

risks, and long end inversion can easily leak back into 10Y spd. Latest spd

levels:

* 2Y -0.56/12.19

* 5Y +0.75/9.56

* 10Y +0.38/3.38

* 30Y +1.62/-14.12

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

* Secured Overnight Financing Rate (SOFR): 2.22% vs. 2.30% prior, $903B

* Broad General Collateral Rate (BGCR): 2.20% vs. 2.28% prior, $425B

* Tri-Party General Collateral Rate (TGCR): 2.20% vs. 2.28% prior, $412B

PIPELINE: Still no new issuance, estimate for week still running around $5B

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

- Dec 12 07-Dec MBA Mortgage Applications (2.0%, --) 0700ET

- Dec 12 Nov CPI (.3%, 0.0) 0830ET

- Dec 12 Nov CPI Ex Food and Energy (.2%, .2%) 0830ET

- Dec 12 Dec Atlanta Fed inflation (.2%, --) 1000ET

- Dec 12 07-Dec crude oil stocks ex. SPR w/w (-0.73m bbl, --)

- Dec 12 US Tsy $24B 10Y note auction (9128285M8) 1300ET

Eurodollar/Treasury Option Summary 

Eurodollar options, Pit/screen:

* -5,000 Sep 68/71 3x2 put spds 1.5 over Sep 73 calls

* +5,000 Green Dec 72 calls, s2.0 vs. 97.205/0.32%

block, 12:06:19ET,

* +10,000 Short Mar 71/73 2x3 call sprd 8.5 over 20k Short Mar 67 puts

* 10,000 Short Dec 71/72 2x3 call sprd at 3

* 5,000 Green Mar 68/72 put sprd at 12.5 vs 9724.5/0.40%

* -110,000 Short Mar 67/68 put spd w/ -27,500 Short Mar 72 calls, 17.0 net

cr/package

* +25,000 Long Green Dec 85/90 call sprd at 4 vs 9721.5/0.05%

* 7,000 Mar 71 puts at 4.25 vs 9720/0.10%

* +10,000 Mar 70/71 put sprd at 0.5 over the Mar 73 calls vs 21/0.42%

* 5,000 Short Mar 68/71 call sprd at 11.5 over the Short Mar 68 puts vs

9712.5/0.50%

* 3,000 May 71/72/73 call tree at 1.5 vs 9714.5/0.10%

* 11,000 Red Dec 85/90 call sprd at 0.5

* 12,000 Red Dec 67 puts at 7 vs 9708/0.25%

* 3,500 Mar 70 puts at 1.5 vs 9719/0.10%

* 5,000 Short Mar 68 puts at 3.5 vs 9714/0.22%

* 3,000 Short Dec 70 puts at 0.5 vs 9709.5/0.20%

* 6,000 Red Sep 75/77 call sprd at 0.5 over the Mar 72 calls

block, 07:35:36ET-07:26:51ET,

* Total -23,000 Short Mar 66/67/68 put tree at 1 vs 9715/0.05%

Tsy options, Pit/screen: 

* Update, over +7,500 USG 131 puts, 2/64 on day

* 2,000 TYG 120.5 straddles, 1-16/64 vs. 800 USH 144 straddles, 3-53/64

* 8,000 TYG 118/118.5 put sprd at 2

* +3,000 TYF 119.5/120/120.5 2x3x1 put flys, 2/64

* +2,800 FVG 112.75 puts, 8/64

* modest sellers TYH 120.5 straddles, 1-41/64

* 1,000 FVF 113/113.25 put spds, 4/64 vs. 113-16/0.15%

* -1,000 TYF 121 calls, 10/64

* over 2,600 TYF 122 calls, 14/64

* Total +8,000 USG 142 puts from 63 to 60

* +2,500 TYH 123/125/127 call flys, 4

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

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