US TSYS: RISK-ON TIED TO BREXIT EXTENSION, NEW HIGHS FOR EQS

US TSY SUMMARY: Well offered all session, US rate action rather muted on

moderate volume (TYZ breached 1M after the bell), many near the sidelines ahead

Wed's multiple policy annc (FOMC, BoC, BoJ), and lead-up to Fri's employment

report. 

- Risk-on drivers: Tsys sold off in early London trade as EU agrees to Jan 31

Brexit extension. UK Parliament vote rejected PM Johnson's third call for early

election after the NY close.

- Carry-over risk-on gained momentum after equity open, Tsys chopped to new lows

as equities climbed to new all-time highs (ESZ9 3042.75) as Pres Trump suggests

Phase I US/China trade pact will be signed at APEC event in Chile on Nov 16-17.

- Despite rate sale, short end continues to reflect likelihood of third rate cut

at Wed's FOMC annc. Flow included better selling in 10s-30s, fast$ and prop

accts, program selling short end, deal-tied selling 3s-10s.

- The 2-Yr yield is up 2.6bps at 1.6435%, 5-Yr is up 4.4bps at 1.6635%, 10-Yr is

up 5.1bps at 1.8455%, and 30-Yr is up 5bps at 2.3369%.

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 -0.01Y; Govt inflation-linked, -0.04Y

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

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

*Agencies................0.08........0.08........0.19

*Credit..................0.09........0.09........0.06

*Govt/Credit.............0.08........0.08........0.06

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

*Aggregate...............0.07........0.08........0.06

*Long Govt/Credit........0.06........0.10........0.05

*Interm Credit...........0.08........0.08........0.06

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

*Interm Govt/Cred........0.07........0.08........0.06

*High Yield..............0.07........0.08........0.07

US TSY FUTURES CLOSE: Weaker but off session lows after the bell, US rates under

risk-on pressure all session due to a couple factors: EU agrees to Jan 31 Brexit

extension, carry-over risk-on gained momentum after equity open. Moderate volume

w/TYZ just breaking 1M after the bell. Yld curves bear steepen, 3M10Y back to

mid-march levels. Update

* 3M10Y  +7.261, 19.29 (L: 11.453 / H: 20.254)

* 2Y10Y  +2.951, 20.021 (L: 17.087 / H: 20.352)

* 2Y30Y  +3.22, 69.56 (L: 66.179 / H: 70.049)

* 5Y30Y  +1.116, 67.564 (L: 65.521 / H: 67.934)

Current futures levels:

* Dec 2-Yr futures down 1.25/32 at 107-19.25 (L: 107-17.875 / H: 107-20.875)

* Dec 5-Yr futures down 5.25/32 at 118-17.5 (L: 118-14 / H: 118-23.5)

* Dec 10-Yr futures down 10/32 at 129-7 (L: 129-01.5 / H: 129-18.5)

* Dec 30-Yr futures down 31/32 at 158-13 (L: 158-05 / H: 159-16)

* Dec Ultra futures down 1-20/32 at 184-5 (L: 183-26 / H: 186-00)

US EURODLR FUTURES CLOSE: Weaker across the strip all session, levels just off

lows after the bell. Lead quarterly outperforming, still reflecting likelihood

of 25bps rate cut at Wed's FOMC policy annc. Current White pack (Dec 19-Sep 20):

* Dec 19 -0.005 at 98.085

* Mar 20 -0.010 at 98.30

* Jun 20 -0.015 at 98.375

* Sep 20 -0.020 at 98.425

* Red Pack (Dec 20-Sep 21) -0.04 to -0.025

* Green Pack (Dec 21-Sep 22) -0.045 to -0.04

* Blue Pack (Dec 22-Sep 23) -0.055 to -0.04

* Gold Pack (Dec 23-Sep 24) -0.05 to -0.045

US DOLLAR LIBOR: Latest settles

* O/N -0.0044 at 1.8016% (-0.0090 last wk)

* 1 Month -0.0052 to 1.7996% (-0.0455 last wk)

* 3 Month +0.0074 to 1.9355% (-0.0251 last wk)

* 6 Month +0.0066 to 1.9398% (-0.0186 last wk)

* 1 Year +0.0395 to 1.9952% (-0.0315 last wk) 

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

* Daily Effective Fed Funds Rate: 1.83%, volume: $73B

* Daily Overnight Bank Funding Rate: 1.81%, volume: $180B

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

* Secured Overnight Financing Rate (SOFR): 1.84%, $1.077T

* Broad General Collateral Rate (BGCR): 1.81%, $447B

* Tri-Party General Collateral Rate (TGCR): 1.81%, $421B

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

29-Oct ---- FOMC policy meeting, day 1 of 2

29-Oct 0855 26-Oct Redbook retail sales m/m

29-Oct 0900 Aug Case-Shiller Home Price Index (0.02%, -0.10%)

29-Oct 1000 Q3 housing vacancies rate

29-Oct 1000 Sep NAR pending home sales index (1.6%, 0.7%)

29-Oct 1000 Oct Conference Board confidence (125.1, 128.0)

29-Oct 1030 Oct Dallas Fed services index

PIPELINE: Hershey, Rogers, Dover all priced, Waiting for Citigroup, Hyundai

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

10/28 $4.25B #Citigroup $1.5B 3NC2 fix/FRN +67, $500M 3NC2 FRN, $2.25B 11NC10

+113

10/28 $1.5B #Hyundai Capital $800M 3Y +120, $700M 7Y +175

10/28 $1B *Hershey Co $300M 5Y +40, $300M 10Y +60, $400M 30Y +80

10/28 $1B *Rogers Communications Inc 30Y +142

10/28 $300M *Dover Corporation 10Y +115

10/?? Chatter: possible T-Mobile US 

Canadian supply

10/28 C$2.5B #Royal Bank of Canada 5Y +98

Eurodollar/Tsy options: 

Eurodollar Options

* +10,000 Mar 85/88 spd vs. -10,000 short Mar 87/90 call spd, 0.0/net

* -5,000 Jan 82/83 put over risk reversals, 0.75

* -3,500 Jun 83 straddles, 36.0

* Update, near -8,000 Sep 81/83/86 iron flys, 20.0

* +10,000 Green Feb 81 puts, 5.5

* -4,000 Jan 82/83 put over risk reversals, 0.75

* -4,000 Nov 80 puts, 1.0

* -5,000 short Jan 83 puts, 10.0 vs. 98.445/0.40%

* -3,500 Jan 82 straddles, 17.5* +7,500 Jun 91/96 call spds, 5.0 vs. 98.43/0.12%

* +5,000 short Dec/Blue Dec 82 put spds, 1.5 net db bear curve steepener

* +4,000 Red Dec'2 87/93 call spds, 8.0

* +7,500 Jun 91/96 call spds, 5.0 vs. 98.43/0.12%

* +5,000 short Dec/Blue Dec 82 put spds, 1.5 net db bear curve steepener

* +4,000 Red Dec'2 87/93 call spds, 8.0

Adds to recent block buy, appr +50k total/day

* +40,000 Jun 91/92 call spds, 1.0 vs. 98.35/0.05%

Block, 1120:08ET

* 10,000 Jun 91/92 call spds, 1.0 vs. 98.35/0.05%

* +5,000 Sep 88/93 call spd w/Sep 91/96 call spds, 11.5

* +10,000 short Jan 80 puts, 1.0 vs. 98.28/0.08%

* +4,000 short Nov 82 puts, 2.5

* Update, >25,000 Dec 82/83/85 call flys, 1.0

* +15,000 Red Dec'20 88/93 call spds, 8.0

* +10,000 Jun 97/100 call spds, cab

* +15,000 Sep 88/93 call spds, 7.0

* +7,000 Dec 82/83/85 call flys, 1.0

* -3,000 Dec 78/80 2x1 put spds, 1.25

Recent screen trade,

* -25,000 Dec 81/83/86 call flys at 3.0 vs. 98.06/0.24%, possible unwind of

outright but at 3.25-3.5 and vs puts in larger size back in September

Ty options:

* 40,000 TYZ 124.5 puts, 1/64

* 4,500 TYF/TYG 130 call strip, 1-20/64 vs. 129-04/0.70%

Block, 0746:53ET combo

* 10,000 TYF 127.5 puts, 21/64 vs.

* 10,000 TYF 131 calls, 20/64

* 4,600 TYH 129-06.5

Screen trade recap

* +10,000 TYZ 131/132/133 call flys, 3/64 recently

* 7,225 TYF 130.5/131.5/132 call trees

* 20,000 FVZ 120.25 calls, 2/64

Large early overnight Blocks:

* 20,000 FVF 119.5/120/120.5 call trees, 2/64

* 20,000 TYF 130.5/131.5 1x2 call spds, 0.0

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

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