US TSYS: Tsy Curve Grinds To New 10+ Year Lows

By Bill Sokolis

     CHICAGO (MNI) - 

US TSYS SUMMARY: Tsys trading mixed by the close, long end outperforming as

March'18 Ultra bond made new session highs in late trade, curves back to making

new 10+yr lows: 2s10s -2.298, 51.125; 2s30s -4.912, 84.210; 5s30s -3.960,

52.661. Tsy correlation to US$ breakdown, dollar bounce not translating to

weaker long end rates. Quiet end to wk on light volume (TYH<800k).

- Equities made new highs in late trade, emini +25.25, 2681.25; gold higher as

well, XAU +2.90, 1255.82. Choppy reacts to any word on tax bill from DC. 

- Knock-on support for long end Tsys after Gilts rallied in early trade. W/FOMC,

BOE and ECB policy annc's in the rear mirror, desks set sites on clearing the

books for upcoming holiday closures and thin volumes.

- After a mixed open, swap spds narrowed across the curve, sources cited program

receiving as Tsy curve resumed flattening; flow includes $109.8k DV01 5s7s

steepener after appr $100k DV01 2s5s flattener and 10Y switch around

2.351-.35125%.

- Eurodollar futures finish mildly weaker across the strip on light volume.

- TSY 3PM ET: 2Y 1.836%; 3Y 1.948%; 5Y 2.154%; 7Y 2.276%; 10Y 2.351%; 30Y 2.683%

US TSY FUTURES CLOSE: Finish mixed, long end making new session highs late.

Current futures levels: 

* Mar Ultra bonds up 27/32 at 169-13 (168-04L/169-13H)

* Mar 30-yr Bond futures up 12/32 at 154-15 (153-22L/154-15H)

* Mar 10-yr futures down 2.5/32 at 124-15.5 (124-07L/124-17.5H)

* Mar 5-yr futures down 3.5/32 at 116-11 (116-07L/116-13.5H)

* Mar 2-yr futures down 1.5/32 at 107-03.25 (107-02.25L/107-04.75H)

US EURODLR FUTURES CLOSE: Weaker across the strip on light volume, quiet end to

the week. Current White pack (Dec'17-Sep'18):

* Dec'17 -0.010 at 98.375

* Mar'18 -0.015 at 98.225

* Jun'18 -0.020 at 98.075

* Sep'18 -0.020 at 97.990

* Red pack (Dec'18-Sep'19) -0.020-0.015

* Green pack (Dec'19-Sep'20) -0.020-0.015

* Blue pack (Dec'20-Sep'21) -0.015-0.010

* Gold pack (Dec'21-Sep'22) -0.010-0.005

US SWAPS: After a mixed open, spds have compressed across the curve in early

trade -- holding near lows into the close. Sources cited program receiving as

Tsy curve resumes descent to new 10+ year lows (2s10s -2.298, 51.125; 5s30s

-3.733, 52.888). Additional flow includes $109.8k DV01 5s7s steepener after appr

$100k DV01 2s5s flattener and 10Y switch around 2.351-.35125%. OTC and exchange

traded option vols declined amid lack of delivered vol on the day. Latest spread

levels:

* 2Y  -0.88/18.69

* 5Y  -1.12/4.38

* 10Y -1.00/-1.44

* 30Y -0.12/-20.38

US OUTLOOK: 

- Dec 18 Tsy $45B 3-Month Bill auction 1130ET

- Dec 18 Tsy $39B 6-Month Bill auction 1130ET

- Dec 18 Dec NY Fed Business Leaders Index (18.9, --) 0830ET

- Dec 18 Dec NAHB home builder index (70, --) 1000ET

Eurodollar/Treasury Option Summary

Eurodollar options, Pit/screen:

* -12,500 Green Dec 75/76/77 put flys, 3.5

* -4,500 Green Dec 76/77 call spds, 8.5

* -2,000 short Jan 78 straddles, 10.5

* +25,000 Jun 78/80 2x1 put spds 1.75 over -12,500 Apr 78/80 put strip

* +7,000 Red Jun 77 straddles, 41.0

* total +15,000 short Mar 81/82 1x2 call spds, 0.0 -- one leg over

* -15,000 short Dec 77/78/80 put flys, 10.0

* -15,000 short Jun 73/76 put spds, 5.0 vs. 97.785 -- mostly on screen

* -16,000 Jun 78/81 put spds w/Sep 76/80 put spd, 20.25 total cr

* 20,000 Jun 78/80 2x1 put spds, 2.5

* +5,000 short Apr 75/76 put spds, 2.0

* +4,000 Jun 80 puts 1.0 over the Jun 81/82 call spds

* +2,500 Mar 82/83 1x2 call spds 1.25 over Mar 81 put

* +10,000 short Dec 78/Blue Dec 76 put spds, 0.0

* +2,000 Green Jan 77 straddles, 12.5

* +3,000 short Jan 77 puts, 1.5

* -2,500 Jan 82 puts, 3.75

* -2,500 Blue Jun 76/78 1x2 call spds, 1.75

* screen, 62.2k EDZ 83 puts, cab -- closing into today's Dec expiry

* 13,700 Green Dec 77 calls, cab while Green Dec 77 puts trade 3.0

Tsy options, Pit/screen,

* >+3,500 USG 150/154/158 iron flys (w/2x strangles), 1-50/64

* 1,700 TUG 107.2/107.5 call spds, 2.5/64

Large buyer USG puts late Thursday is back in this morning

* +7,500 USG 153 puts, 1-01/64. Yesterday: +42,919 from 103-105 (7.26 to 7.38%

vol) ... open interest +31,061 to 45,141

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

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