US TSYS: TSY CURVE FLATTER/STUBBORN BID FOR BOND

US TSYS SUMMARY: *** Tsys trade mostly weaker into Monday's close, well off

early session lows, Mar 30Y futures inexplicably outperforming despite a strong

rebound in equities (emini +50.0, 2669.0 in late trade, DJIA +545). VIX/vol

index receded to 25.50 late trade vs. 29.70 high.

- Moves a result of curve steepener unwinds/renewed flatteners amid limited

market depth ahead Wed CPI/Thu PPI headline data for week. Overall volume well

off last week's pace w/Japan mkts closed for holiday.

- Bonds lead weakness in early trade, following Gilt weakness on back of hawkish

comments from BoE MPC member Gertjan Vlieghe. Tsys trading weaker, mid-/low-end

O/N range, volume off last wk's pace w/Japan out on holiday (TYH>320k); risk-on

start to wk w/global equity rally. Data event focus, budget balance, CPI Wed

(0.4% est), PPI Thu (0.3% est), Fed speak w/Q&A limited to Cleveland Fed Mester

on Tuesday.

- Pick-up in high-grade corp issuance, better front end selling on net; ongoing

heavy option volume dominated by low delta puts.

- Late ylds: 2Y 2.077%, 3Y 2.304%, 5Y 2.557%, 7Y 2.763%, 10Y 2.857%, 30Y 3.136%

US TSY FUTURES CLOSE: Mostly lower, Mar 30Y bond bucking move/firmer despite

surge in equities (emini +50.0, DJIA, +545). Sources suggest bid related to

hedge vs. underperformance of higher grade equities. Latest curve update:

* 2s10s +0.717, 78.111 (78.842H/74.845L);

* 2s30s -2.153, 106.078 (108.244H/101.988L);

* 5s30s -3.506, 57.946 (61.395H/55.287L);

Current futures levels:

* Mar Ultra bonds down 3/32 at 156-14 (155-00L/157-20H)

* Mar 30-yr Bond futures up 5/32 at 144-10 (143-04L/145-06H)

* Mar 10-yr futures down 10.5/32 at 120-27 (120-20L/121-01.5H)

* Mar 5-yr futures down 7/32 at 114-19.25 (114-15.5L/114-22H)

* Mar 2-yr futures down 2.75/32 at 106-21.75 (106-20.5/106-23H)

US EURODOLLAR FUTURES CLOSE: Lower across the strip, Reds-Golds flat. Current

White pack (Mar'18-Dec'18):

* Mar'18 -0.015 at 98.025

* Jun'18 -0.005 at 97.855

* Sep'18 -0.020 at 97.745

* Dec'18 -0.025 at 97.625

* Red pack (Mar'19-Dec'19) -0.035-0.040

* Green pack (Mar'20-Dec'20) -0.045

* Blue pack (Mar'21-Dec'21) -0.045

* Gold pack (Mar'22-Dec'22) -0.045-0.040

US SWAPS: Quiet start to week for swaps, spd curve steeper -- moderate unwind

after Fri's sharp flattening. Modest two-way flow, positioning ahead mid-week

data. Some front end deal-tied hedging adding to spd curve move. Light overnight

flow includes 2s3s10s fly, paying belly after rate paying in 2s and 3s. OTC

swaption vol running steady/mixed, spd curve mildly flatter. Latest spread

levels:

* 2Y  +0.06/27.75

* 5Y  -0.31/9.38

* 10Y +0.06/0.88

* 30Y +1.75/-17.12

PIPELINE: $1.6B Honda 3-part and $800M CommEd launched

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

02/12 $1.6B #American Honda Finance 3Y Fix +40, 3Y FRN +21, 10Y +68

02/12 $800M #Commonwealth Edison 30Y +85

02/12 $1B KFW 21M Global MS -5a

02/12 $Benchmark, General Dynamics CSRA deal

Potential upcoming issuance in the near term:

Chatter, 3M (MMM) A1/AA-

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

Chatter, KeyBank 

Chatter, Fifth Third Bank (FITB) A3/A

Chatter, State Street Corp (STT) A1/A

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

- Feb 13 Jan NFIB Small Business Index (104.9, --) 0600ET

- Feb 13 Clev Fed Pres Mester, Dayton Area Chamber of Commerce Government

Affairs Breakfast Series, Dayton, Ohio, Q&A 0800ET

- Feb 13 10-Feb Redbook retail sales m/m (0.0%, --) 0855ET

- Feb 13 US Tsy 4W Bill auction 1100ET

Eurodollar/Treasury Option Summary

Eurodollar options, Pit/screen:

* 10,000 Green Mar 72/73 call spds, 4.5 vs.

* 30,000 Green Mar 68 puts, 0.5

* -15,000 Blue Jun 70 puts, 15.0 vs. 97.10

* 10,000 short Jun 76 calls, 7.5 vs. 97.465/0.30%

* 10,000 Green Jun 75 calls, 8.0 vs. 97.235/0.28%

* 20,000 Apr 78 puts, 7.0 vs. 97.84/0.45%

Blocks, 1104:03ET,

* -10,000 Jun 76/77/78 put flys, 4.0

* 10,000 Mar 81/82 3x2 put spds, 10.5

* -5,000 Green Mar 73 calls vs. Gold Mar 71 calls, 1.5 net, adds to earlier

Block

* 5,000 Jun 75 puts, 0.5

* 4,000 Mar 81/82 3x2 put spds, 10.5

Block, 0928:29ET,

* +10,000 Green Mar 73 calls, 8.5 vs.

* -10,000 Gold Mar 71 calls, 10.0

* +10,000 Green Mar 68/70/75/76 call condors, 10/64 vs. 97.295/0.10%

* total -22,000 (12k Blocked) Mar 80/81 2x1 put spds, 5.5

* -10,000 Apr 81 puts, 11.5 vs. 98.01/100%

* -10,000 Mar 80 puts, 3.25

* -5,000 Dec 80/82 put spds 22.5 over the Dec 85/87 call spds

Block, 0832:00ET,

* 5,000 Mar 81/82 3x2 put spds, 10.5 net

* +40,000 Sep 75 puts, 2.0

* 5,000 Green Feb 75/76 put spds, 0.5

* +5,000 short Jun 75 vs. -Blue Jun 72 call spds, 1.5

* -12,000 Apr 78 straddles, 12.0

Tsy options, Pit/screen:

* 2,000 TYH 121.5/122 call spds 6/64 vs.

* 2,000 wk3 TY 122.2/122.7 call spds, 1/64

* -3,500 TYJ 120.5 calls, 48/64 over the TYH 123 calls

* +1,500 TYJ 117.5/118/119 broken put flys, 8/64

* 5,000 FVH 114 puts, 6/64 vs. 114-18/0.21% earlier

* 1,100 FVJ 113/115.75 strangles, 12/64

* 1,200 TYJ 120 straddles, 1-41/64

* 3,000 TYJ 120/120.5 strangles, 1-25/64 vs. 120-26

* 5,000 TYJ 118.5 puts, 16/64 vs.

* 4,000 TYJ 119 puts, 32/64 vs.

* 4,000 TYH 121.5 calls, 12

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

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