US TSYS: STEADY FOMC ANNC, TSY REFUNDING WEIGHS ON SHORT END

US TSYS SUMMARY: Choppy session for what amounted to a steady FOMC policy annc.

Never underestimate month end extensions on flows. Note, mkts were anxious of

10Y yld breach of 2.5% couple wks ago, 5Y ylds topped that Tue to Wed high

2.5509% revisiting Apr'10 lvl; 10Y ylds to Apr'14 lvls (2.7519H).

- Equities back higher after reversing gains/lower post FOMC (emini +2.0, 2826.5

late), gold higher (XAU +7.95, 1346.46), oil higher (WTI +0.35, 64.85).

- Rates higher on open ahead ADP private ADP(+234k), TBAC refunding annc ($66B

total 3/10s30 next wk), Chicago PMI (65.7 from 67.8/Dec) and Janet Yellen's

final FOMC annc (no presser/SEPs, however).

- Tsy futures traded heavy into midday, lead by 5s and 10s. Sources reported

continued selling from banks and real$ accts in 5s, 10s and 30s, some modest

short covering in5s from fast$ before latest downdraft. Hearing renewed interest

in 2s and 5s vs. 30s flatteners by props as curves resume flattening.

- Long end swap spds gapped wider -- canary in the coal mine for bank

de-regulations. 

- Late ylds: 2Y 2.145, 3Y 2.286%, 5Y 2.521%, 7Y 2.658%, 10Y 2.716%, 30Y 2.946%

US TSY FUTURES CLOSE: Mixed by the bell, curve sharply flatter with long end

outperforming in post FOMC move; short end off lows on some sizable month-end

flows/Blocks (+25k FVH 114-23.5 through -22.75 offer). Latest curve update:

* 2s10s -2.016, 57.137 (60.303H/56.718L);

* 2s30s -4.428, 79.900 (85.448H/79.106L);

* 5s30s -4.221, 42.131 (47.065H/41.331L);

Current futures levels:

* Mar Ultra bonds up 29/32 at 161-24 (160-24L/162-03H)

* Mar 30-yr Bond futures up 11/32 at 147-23 (147-07L/148-06H)

* Mar 10-yr futures down 2.5/32 at 121-18 (121-13L/121-27.5H)

* Mar 5-yr futures down 4/32 at 114-22.75 (114-20.75L/114-30.25H)

* Mar 2-yr futures down 1.5/32 at 106-20.25 (106-19L/106-22.5H)

US EURODOLLAR FUTURES CLOSE: Mostly lower by the bell, long end off lows. Late

bounce in US$ (DXY keeping short end anchored. Current White pack

(Mar'18-Dec'18):

* Mar'18 -0.005 at 98.120

* Jun'18 -0.015 at 97.900

* Sep'18 -0.010 at 97.760

* Dec'18 -0.010 at 97.620

* Red pack (Mar'19-Dec'19) -0.015-0.030

* Green pack (Mar'20-Dec'20) -0.030

* Blue pack (Mar'21-Dec'21) -0.030-0.015

* Gold pack (Mar'22-Dec'22) -0.015 to steady

US SWAPS: Spds mostly wider, long end leading move after gapping wider on

renewed hopes of bank deregulation annc soon, 30Y off deeper inverted levels on

hopes for reducing bank's leverage ratio (SLR), etc. after chatter made rounds

again that Fed, OCC, FDIC may be close to announcing changes after being

disappointed over a week ago when vice chair for supervision of the Federal

Reserve Board of Governors Randy Quarles failed to deliver. Increase Tsy funding

keeping short end anchored. Typical flow earlier, light heading into FOMC with

exception of prop and fast$ paying in long end. Latest spread levels:

* 2Y  +0.00/18.81

* 5Y  +0.25/7.50

* 10Y +0.88/2.75

* 30Y +2.38/-12.38

PIPELINE: $3.2B Priced Wednesday

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

01/31 $1.5B *Bank of America 8NC7 FRN at 3mL+77

01/31 $1B *Nederlandse Waterschapsbank 18-month FRN 3mL +2

01/31 $700M *National Rural Utilities 10Y +70

01/31 $500M Export Development Canada Min, 2Y

01/31 Chatter, 3M (MMM) A1/AA-

01/31 Chatter, Bank of New Zealand (BZLNZ) A1/AA-

01/31 Chatter, KeyBank 

01/31 Chatter, Fifth Third Bank (FITB) A3/A

01/31 Chatter, State Street Corp (STT) A1/A

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

- Feb 01 Jan NA-made light vehicle sales SAAR (13.6m, 13.0m)

- Feb 01 Jan challenger layoff plans (-3.6%, --) 0730ET

- Feb 01 27-Jan jobless claims (233k, 238K) 0830ET

- Feb 01 Q4 non-farm productivity (p) (3.0%, 0.7%) 0830ET

- Feb 01 Q4 unit labor costs (p) (-0.2%, +1.0%) 0830ET

- Feb 01 Jan Markit Mfg Index (final) (55.5, --) 0945ET

- Feb 01 28-Jan Bloomberg comfort index 0945ET

- Feb 01 Jan ISM Manufacturing Index (59.7, 58.8) 1000ET

- Feb 01 Dec construction spending (0.8%, 0.5%) 1000ET

- Feb 01 26-Jan natural gas stocks w/w 1030ET

- Feb 01 31-Jan Fed weekly securities holdings 1630ET

Eurodollar/Treasury Option Summary

Eurodollar options, Pit/screen: 

Blocks, 1428:27ET,

* 10,000 short Apr 72/75 2x1 put spds, 8.0 vs. Dec 78 calls, 4.0

Large late Block, 1421:00ET,

* 33,500 Jun 77/78 2x1 put spds, 3.0

* 33,500 Dec 72/73 2x1 put spds, 1.0

* -5,000 Green Mar 66/78 strangles, 0.5 after buyer of Green Feb 71/75 strangle

* -5,000 Green Jun 77/80 call spds vs. short Jun 80/82 call spds, 1.0 seepener

* -18,000 Mar 80/81 put spds, 1.75 vs. 98.12 to -125

* +20,000 Green Apr 71 puts, 5.5

* -10,000 short Mar 73 puts w/-5,000 Green Apr 70/71 put spd, 10.5 total

* -8,000 short Mar 73/Green Apr 70 put strip, 4.0

* -4,000 short Sep 72 puts vs. Blue Sep 68/71 put spd, 1.5 bet credit/steepener

* Update, total -20,000 Jun 78 calls, 6.5, adds to earlier Block

* +10,000 short Jun 72/73 put spds w/ short Apr 73/75 put spds, 11.0 total

* +15,000 long Green Jun'20, 62/67 2x1 put spds, 3.5

* -20,000 Mar 80/81 put spds, 1.75

* +5,000 Green Mar 75 calls, 2.0

* -2,000 Green Mar 71/73 call over risk reversals,

* 2,000 Blue Dec 68/71 2x1 put spds, 6.5 vs. 97.18/0.10%

* small buyer Blue Sep/Blue Dec 71 straddle strip buyer 101.0

* +10,000 short Jun 71/73 put spds 4.0 over short Jun 77 calls vs. 97.425/0.10%

Block, 0941:46ET,

* -10,000 Jun 78 calls, 6.5, crossed on bid

* +20,000 short Feb 73/75 put spds, 2.0-1.75

* 4,000 short Mar 73/Green Apr 70 put spds, 4.0

Tsy options, Pit/screen:

* -3,000 USJ 150 calls from 34- to 36/64 post FOMC

Block, 1315:01ET, this one not showing up on Bloomberg screen

* 10,000 FVH 114.5 puts, 12.5/64, crossed mid-market

* Update, total +3,500 TYM 121 straddles, 2-13/64

* Update, total +2,500 TYH 121.5 straddles, 1-2/64

Block, 1315:01ET, appears to be a buy

* 10,000 TYH 120.5 puts, 12/64, crossed on the offer

* +1,250 TYH 121.5 straddles, 1-2/64

* +1,000 USH 149 calls, 51/64

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

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