US TSYS: TSYS REVERSE EARLY LOSSES, YLD CURVES BULL FLATTEN

US TSY SUMMARY: Tsys reversed early losses, yld curves flatten, 3s5s invert.

Rates opened weaker amid strong risk-on tone following Trump/Xi dinner and a

tweet overnight (US handshake agreement to delay slapping China w/tariff

increase for 90 days; equities surged, autos benefitted after Trump tweeted

China will reduce/remove US auto tariffs). 

- Bear flattening flipped to bull flattening (2s30s -6.025/44.130; 5s30s

-4.243/43.343). Tsy futures rebounded as equities pared strong gains.

Decent/heavy selling in short end after LIBOR sets (1M +0.0320 to 2.3789%; 3M

+0.0152 to 2.7513%).  

- Number of data items originally scheduled for Wed, rescheduled due to Wed's

national day of mourning on observance of Pres Bush passing away last Fri. ISM,

US Productivity, now ADP all moved to Thu. Beige Book will still be released Wed

at 1400ET.

- Fed chair Powell testimony to JEC rescheduled, but time still NOT annc'd --

Fed blackout begins Fri at midnight. Tsy cash/ylds: 2Y 99-27 (2.831%), 5Y

100-05.25 (2.838%), 10Y 101-05 (2.988%), 30Y 101-29 (3.274%).

US TSY FUTURES CLOSE: Trading mixed with the long end outperforming; strong

volume (TYH 1.45M); curves sharply flatter; update:

* 2s10s -4.483, 15.455 (15.455L/20.681H);

* 2s30s -5.944, 44.211 (43.724L/50.143H);

* 5s30s -3.993, 43.593 (43.099L/47.125H);

Current futures levels:

* Mar Ultra bonds up 30/32 at 153-11 (151-26L/153-16H)

* Mar 30-yr Bond futures up 21/32 at 140-18 (139-14L/140-21H)

* Mar 10-yr futures up 4.5/32 at 119-19 (119-4.5L/119-20.5H)

* Mar 5-yr futures up 0.5/32 at 112-31.25 (112-24.5L/113-1.25H)

* Mar 2-yr futures down 1.5/32 at 105-14.25 (105-13.25L/105-15.75H) 

US EURODOLLAR FUTURES CLOSE: Trading mixed with the long end outperforming;

strong volume. Current White pack (DEC'18-SEP'19):

* DEC'18 -0.0150 at 97.1875

* MAR'19 -0.020 at 97.135

* JUN'19 -0.035 at 97.050

* SEP'19 -0.035 at 96.995

* Red pack (DEC'19-SEP'20) -0.035-0.015

* Green pack (DEC'20-SEP'21) +0.005-0.010

* Blue pack (DEC'21-SEP'22) +0.010

* Gold pack (DEC'22-SEP'23) +0.025-0.015

US DOLLAR LIBOR: Latest settles, 

* O/N +0.0043 to 2.1819%

* 1 Month +0.0320 to 2.3789%

* 3 Month +0.0152 to 2.7513%

* 6 Month +0.0006 to 2.8952%

* 1 Year +0.0179 to 3.1382%

US TSYS: *** /REPO REFERENCE RATES: (rate, volume)

* Secured Overnight Financing Rate (SOFR): 2.28% vs. 2.24% prior, $919B

* Broad General Collateral Rate (BGCR): 2.27% vs. 2.23% prior, $423B

* Tri-Party General Collateral Rate (TGCR): 2.27% vs. 2.23% prior, $407B

PIPELINE: NEW DEAL: Caterpillar Financial in 3-Parts

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

12/03  $Benchmark Caterpillar Financial 2Y +65a, 2Y FRN L-equiv, 5Y +95a

12/03  $Benchmark ING 15NC10 +275a

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

- Dec 04 01-Dec Redbook retail sales m/m (0.8%, --) 0855ET

- Dec 04 Nov ISM-NY current conditions (69.8, --) 0945ET

- Dec 04 Dec IBD/TIPP Optimism Index (56.4, --) 1000ET

- Dec 04 US Tsy $26B 52W bill auction (912796RN1) 1130ET

Eurodollar/Treasury Option Summary 

Eurodollar options, Pit/screen:

* 20,000 Short Mar 67/68 put strip at 12 vs 9697/0.62%, adds to -10k blocked and

-15k sold in pit for -45k sold all day

* 14,000 Jun 70/73 1x2 call sprd at 9.5 vs 06/0.30%

* -6,000 Dec 71/72 put sprd at 6.5

block, 11:51:37ET, CORRECTION

* -10,000 Short Mar 67/68 put sprd at 12 vs 9697/0.62%, note -15k sold in pit

blocks, 11:35:22ET-11:39:14ET,

* 33,030 Short Mar 68 calls at 18

* 28,350 Short Mar 71 calls at 7.5

* 21,758 Short Mar 66 puts at 2

* 22,507 Short Mar 63 puts at 0.5

--

* +13,060 Red Mar'20 at 96.98, buy through 98.975 post time offer

* 20,000 Short Dec 70 calls at 3 vs 9696.5/0.36%

block, 10:53:52ET,

* 10,000 Short Dec 68 puts at 1.5

--

* -4,000 Long Green Dec 70 Straddle at 76.5

* 5,000 Mar 70/71 put sprd at 4.25 vs 9714/0.28% 10:06 12/03 EST

* 15,000 Short Jan 66/67 put sprd at 1

* -7,500 Short Dec 68/70 puts over risk reversal at 0.5

* 5,000 Green Dec 67/68 put sprd at 1.5 vs 9697/0.18%

* 5,000 Short Dec 68 puts at 2.5 vs 9693/0.25%

* +5,000 Short Jan 65/66/67 put tree at 0.75

* 4,250 Red Dec 70/75 1x2 call sprd at 7, adds to recent 10k block

block, 08:30:41ET,

* 10,000 Red Dec 70/75 1x2 call sprd at 7

Modest screen trade before the bell, recent buyer Dec midcurve calls

* +9,350 short Dec 71 calls, 0.5

Earlier flow includes

* 4,000 Apr 68/70 put spds vs. 72 calls

* 2,250 Mar 71/72 1x2 call spds

* 6,500 Jun 70 calls

Tsy options, Pit/screen:

* -3,000 TYG 118.5/121.5 call sprd at 109

* 5,000 FVF 113/113.5 call spds, 1/64

* 1,500 wk1 TY 118.7 puts, 2/64 vs. 119-12.5

* +4,000 TYG 121.5 calls at 6

* -4,000 TYF 119.5 calls at 19

* 2,200 wk2 TY 118.5/119/119.5 put flys at 9/64 vs. 119-05

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

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