US TSYS: *** TSYS RALLY ON STRONG $12B 30Y R/O, FRI CPI FOCUS

US TSYS SUMMARY: After trimming losses into the auction, Tsys rallied on strong

$12B 30Y re-open auction, 2.30% stop through to a 2.867% rate, bid/cover of 2.74

(highest since Dec 2014). Curves well off early steeper levels/flatter. Equities

stronger (emini +13.75, 2764.25), gold stronger (XAU +6.4, 1323.32), oil well

off highs (WTI +0.01, 6.58 vs. 64.77H).

- Early chop, Tsys indicated higher into open, reversed course on ECB headlines

that guidance could gradually shift in 2018. Rates had corrected higher after

word Wed's after Bloomberg sources story China would slow/halt Tsy purchases

denied by China offcls. Rates had already recovered from sharp bear curve

steepener late Wed, surged in evening.

- Rates recovered slightly on weaker than exp PPI, supportive of short

end/steeper curve with participants not anticipating a blow-out figure for Fri's

CPI (0.1% est vs. 0.3% high-side rumor. Flow included moderate two-way trade

ahead midday, positioning ahead Fri's CPI, deal- and auction-tied hedging in the

mix, some sporadic scale-in 5s30s flatteners by props.

- Late ylds: 2Y 1.973%, 3Y 2.084%, 5Y 2.314%, 7Y 2.454%, 10Y 2.531%, 30Y 2.867%

US TSY FUTURES CLOSE: Mostly higher, off post-30Y auction highs, late seller in

front end w/-20k TUH 106-28.75. Latest curve update:

* 2s10s -2.569, 55.464 (58.945H/55.140L) vs. 62.336 high Wed;

* 2s30s -3.203, 88.992 (93.467H/88.289L) vs. 97.359 high Wed;

* 5s30s -1.686, 55.073 (57.704H/54.022L) vs. 59.513 high Wed; 

Current futures levels:

* Mar Ultra bonds up 21/64 at 164-00 (162-23L/164-11H)

* Mar 30-yr Bond futures up 11/32 at 150-13 (149-17L/150-20H)

* Mar 10-yr futures up 3.5/32 at 123-03.5 (122-27.5L/123-05H)

* Mar 5-yr futures up 1.5/32 at 115-21.5 (115-18L/115-22.25H)

* Mar 2-yr futures down .25/32 at 106-28.75 (106-28.25L/105-29.5H)

US EURODOLLAR FUTURES CLOSE: Mostly higher by the close, well off early session

lows on decent volume; cautious trade ahead Friday's CPI (0.1% est). Current

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

* Mar'18 -0.005 at 98.180

* Jun'18 +0.000 at 97.995

* Sep'18 +0.005 at 97.880

* Dec'18 +0.005 at 97.770

* Red pack (Mar'19-Dec'19) +0.010-0.015

* Green pack (Mar'20-Dec'20) +.010-0.015

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

* Gold pack (Mar'22-Dec'22) +0.015-0.020

US SWAPS: Spds running wider by the bell,top end of range after starting session

steady/mixed. Spds widened into post 30Y R/O Tsy rally, sporadic rate paying in

5s-30s from props and real$. Earlier two-way in 2s5s curve trade, 3s5s steepener

and 5s switch recently, macro fund receiver in 30s. Incoming supply and 30Y R/O

helped keep lid on spds. OTC and exchange traded option vol continued to drift

lower on bounce to older ranges in rates. Latest spread levels:

* 2Y  +0.06/19.88

* 5Y  +0.38/4.56

* 10Y +0.94/-0.88

* 30Y +0.56/-20.62

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

- Jan 12 Dec US CPI (0.4%, 0.1%) 0830ET

- Jan 12 Dec US CPI Ex Food and Energy (0.1%, 0.2%) 0830ET

- Jan 12 Dec retail sales (0.8%, 0.4%) 0830ET

- Jan 12 Dec retail sales ex. motor vehicle (1.0%, 0.3%) 0830ET

- Jan 12 Dec retail sales ex. mtr veh, gas (0.8%, --) 0830ET

- Jan 12 Nov business inventories (-0.1%, +0.4%) 1000ET

- Jan 12 Q1 St. Louis Fed Real GDP Nowcast 1100ET

- Jan 12 Q1 NY Fed GDP Nowcast 1115ET

- Jan 12 Philly Fed Harker, Chamber of Commerce Eco Luncheon w/Q&A, Penn, 1230ET

- Jan 12 Bstn Fed Rosengren: Money, Models, Innovatn; La Jolla CA 1615ET

Eurodollar/Treasury Option Summary

Eurodollar options, Pit/screen:

Block, 1228:47ET,

* 10,000 Mar 82/83 call spds, 1.5

* +25,000 Blue Mar 73 puts, 6.0 vs. 97.465/0.36%

* 8,000 short Mar 75/76 put spds, 3.5 vs.

* 8,000 short Mar 78 calls vs. 97.685/0.37%

* 9,000 Blue Mar 73 puts, 6.0 vs. 97.465/0.36%

* 3,000 Apr 81/82 call spds, 1.0

* +5,000 Jun 80/81 strangles, 10.5 vs. 97.98

* +5,000 short Feb 78 calls, 1.0

* +5,000 short Feb 77/78 1x2 call spds, 1.5 

* +5,000 Green Jun 72 puts, 5.5

* -5,000 Green Mar 76 puts, 13.5

* +5,000 Dec 82 calls, 2.0 vs. 97.785/0.10

* -5,000 Red Dec 71 puts, 10.5 vs. 97.55

* Update, total -5,000 Green Mar/Green Apr 75 straddle strip, 41.5-41.0

* -5,000 short Jan 76/78 put spds, 17.5

* +5,500 short Mar 81 calls, 0.5 on screen

* 5,000 Jun 82/81 call spds, screen

* +5,000 short Apr 75/76 1.5x1 put spd 0.25 over 78 calls, adds to appr 50k Wed

* -5,000 Green Mar 71/75 put spds, 7.0 in pit

* -20,800 Jun 78/80 put spds vs. +short Jun 75/76 put spd, 0.5 net cr

* +20,000 Jun 81/83 call spds vs.-Green Jun 77/78 call spd

* 5,000 short Feb 75/76 2x1 put spds

Tsy options, Pit/screen:

* +10,000 TYJ 121/122.5 put spds, 32/64, ongoing buyer from 26/64 low this week

* -7,000 TYH 120.5/123 put spds, 36

* 4,000 TYG 122.75 puts, 20/64

* 4,000 TYG 122 puts, 5/64

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

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