US TSYS: TSYS OFF LOWS, POSITIONING AHEAD POTUS SoU, FOMC

US TSYS SUMMARY: Rates weaker by the bell, well off early session lows to near

top end of range on heavy volume in futures (TYH>1.7M) largely occurring in

early trade. Curves steepened but pared gains late (2s30s +2.666, 81.776

(82.683H/78.226L)). Early weakness on ECB Knot comments that ECB should end

asset buying "as soon as possible after September". Equities weaker (emini

-16.5, 2858.0), gold weaker (XAU -8.10, 1341.60), oil weaker (WTI -0.61, 65.53).

- Rates hammered Hammered into the open/rebounded after making new lows on very

heavy futures volume, ylds surged/broke range (2Y 2.144% +.0281, Sep'08 lvl; 10Y

2.718 +.058) despite month end extensions and potential for large pension

rebalancing out of equities into Tsys. Going to be a busy week w/POTUS State of

Union Tue, Tsy refunding annc and FOMC Wed, NFP Fri.

- Modest start for corporate issuance as earnings continue to roll out, heavy

option volume, long put sales on profit taking, others continue to buy/hedge

additional rate hikes. Position squaring ahead POTUS State of Union address Tue

evening; No rate change from Fed expected Wed.

- Late ylds: 2Y 2.116%, 3Y 2.252%, 5Y 2.492%, 7Y 2.625%, 10Y 2.694%, 30Y 2.940%

US TSY FUTURES CLOSE: Mostly weaker (short end catches late bid) but well off

early session lows, heavy session volume largely occurring in the first half.

Curves steeper, off highs. Latest curve update:

* 2s10s +3.364, 57.328 (58.178H/53.220L);

* 2s30s +2.666, 81.776 (82.683H/78.226L);

* 5s30s +0.487, 44.438 (45.006H/42.223L);

Current futures levels:

* Mar Ultra bonds down 24/32 at 161-28 (160-31L/162-27H)

* Mar 30-yr Bond futures down 18/32 at 148-06 (147-18L/148-29H)

* Mar 10-yr futures down 8/32 at 121-26 (121-18L/122-04H)

* Mar 5-yr futures down 3/32 at 114-28 (114-21.75L/114-31.5H)

* Mar 2-yr futures steady at 106-21.25 (106-18.75L/106-21.5H)

US EURODOLLAR FUTURES CLOSE: Mildly lower in short end after late sell interest,

long end of strip lower/off lows. Current White pack (Mar'18-Dec'18):

* Mar'18 -0.005 at 98.125

* Jun'18 -0.005 at 97.915

* Sep'18 +0.000 at 97.775

* Dec'18 -0.005 at 97.635

* Red pack (Mar'19-Dec'19) steady to -0.015

* Green pack (Mar'20-Dec'20) -0.020-0.030

* Blue pack (Mar'21-Dec'21) -0.035-0.040

* Gold pack (Mar'22-Dec'22) -0.040-0.050

US SWAPS: After a wider start, spds running mostly tighter by the bell -- near

session lows amid modest two-way positioning and swappable supply contributing

to move. Late rate paying in 2s, outright and on fly vs. 5s. OTC swaption vol

off early highs as underlying rates finish near top of range. Latest spread

levels:

* 2Y  +0.62/19.25

* 5Y  -0.12/7.06

* 10Y -0.12/2.19

* 30Y -0.31/-14.25

PIPELINE: $1.5B FedEx to priced, $1.015B Chile Launched

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

01/29 $1.5B *FedEx Corp, $500M 10Y +72, $1B 30Y +112

01/29 $2.25B #JPMorgan Chase Bank, $1.25B 3NC2 Fxd/FRN T+48, $1B 3NC2 FRN 3ML

+29

01/29 $1.015B #Republic of Chile, 10Y; IPT +55

01/29 $500M Kommunalbanken AS (KBN), 3Y FRN

01/29 Chatter, 3M (MMM) A1/AA-

01/29 Chatter, Bank of New Zealand (BZLNZ) A1/AA-

01/29 Chatter, KeyBank 

01/29 Chatter, Fifth Third Bank (FITB) A3/A

01/29 Chatter, State Street Corp (STT) A1/A

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

- Jan 30 FOMC policy meeting, in Washington 

- Jan 30 27-Jan Redbook retail sales m/m (0.0%, --) 0855ET 

- Jan 30 Nov Case-Shiller Home Price Index (0.7, --) 0900ET 

- Jan 30 Q4 housing vacancies rate (1.6%, --) 1000ET 

- Jan 30 Jan Conference Board confidence (122.1, 123.8) 1000ET 

- Jan 30 Jan Dallas Fed services index (18.1, --) 1030ET 

- Jan 30 $20B Tsy 3M 52W bill auction 1130ET 

- Jan 30 Dec farm prices (4.2%, --) 1500ET

Eurodollar/Treasury Option Summary

Eurodollar options, Pit/screen: 

* 5,000 short Apr/short Feb 73 put strip, 6.5

* 4,000 Jun 77/short Jun 70 put spd, 0.0

* 20,000 Green Jun 67/68 put spds, 2.0 vs. 97.255/0.12%

* +20,000 Green Apr 71/72/73 put flys w/ Green Apr 67/70 put spds, 10.5 total

* 10,000 Green Jun 67/70 put spds, 1.5

* 5,000 Green Apr 67/70 put spds, 2.5

* 5,000 Green Apr 72/73 2x1 put spds, 5.0

* +2,500 Blue Sep 62/63/67 put flys, 4.0

* Update, total +20,000 Red Sep19 67/71 2x1 put spds, 4.5

* Update, total +22,500 short Mar 73/75 put spds, 4.0 vs. 97.52/0.25%

* Update, total +35,000 short Jun 75 puts, 16.5 vs. 97.425/0.58%

* 6,000 Red Sep19 67/71 2x1 put spds, 4.5

* +5,000 Green Mar 70/71 put spds, 2.0 vs. 97.285/0.10%

* 5,000 Green Mar 71 puts, 3.0 vs. 97.33/0.10%

* +10,000 short Sep 73/75 put spds, 4.0

* +3,000 Dec 78 calls, 4.0 vs. 97.595/0.20%

* +3,000 Jun 80/81/82 call flys, 1.5

* -2,500 Jun 72/73 2x1 put spds, 0.5/2-leg over

* +12,500 short Mar 73/75 put spds, 4.0 vs. 97.52/0.25%

* +10,000 Mar 81 puts, 2.5

* Decent late overnight blocks added significantly to volume:

* +50,000 Mar 80 puts, cab w/ 50,000 Jun 77 puts 1.0 around 0530ET, additional

6k Mar 80 puts cab Blocked, more June puts trade on screen

Block, 0759:44ET theme on Blocks, accts taking profits on long puts

* -7,000 Jun 78 puts, 4.0

Tsy options, Pit/screen:

* 3,000 TYH 121.5/122.5 put spds, 35/64

* 1,050 TYM 121/121.5 strangles, 2-2/64

* 1,000 TYH 125/126/127 1x3x2 call flys, 1/64 net/wings over

* 2,000 USH 138/158 risk reversals, 0.0 vs. 148-10

* 1,000 TYH 121 puts, 20/64 vs. 121-23

* +6,500 FVH 114.25/114.5 put strips, 24.5/64 vs. 114-23/0.68%

* 4,125 TYH 121.5 puts, 35/64 vs. 121-19

* +2,000 TYH 120.7/121/121.5 2x3x1 put flys, 3/64

* 1,250 TYH 123.5/124 1x2 call spds, 1/64

Desks concur earlier Block sales TYH 120.5 puts at 15- to 14/64 were profit

taking, that said seeing some consistent buying of TYH 120 puts, 10/64 last,

even as underlying recovers from heavy selling into the open.

Block, 0758:00ET, adding to earlier Block/sale at 15/64

* -10,000 TYH 120.5 puts, 14/64 vs. 121-20/0.24%

Block, 0744:00ET, hit bid/still offered

* -23,969 TYH 120.5 puts, 15/64 vs. 121-20/0.27%

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

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