US TSYS: TSYS TEMPORARILY FADING MIDEAST TENSIONS

     US TSY SUMMARY: Weaker, near late session lows as mkt fades current Mideast

rhetoric/risk-off tone, unwinding about a third of Fri's long end lead rally.

Unexpectedly large (>$25B) corporate issuance added to sell pressure; late

headlines US preparing to pull out of Iraq may have added slightly to late rate

sale. Tsy yld curves reversed early flattening, running steeper. Gold remains

strong (+14.0), West Texas Crude steady at 63.04.

- Rates traded lower/extends new session lows earlier as geo-pol/safe-haven bid

support evaporates ahead midday. Taking heated US/Iran rhetoric in stride, some

desks anticipated the reversal as long as there is no immediate and/or "visible"

retaliation by Iran (cyber-attacks not deemed a high threat) for US killing

Iran's Soleiman. Volume strong as yld curves moving off earlier flatter levels. 

- Minimal market react to Reuters headlines below, some additional risk-off

unwinding. Fading Mideast tensions via weaker Tsys likely will be temporary:

"U.S.-LED COALITION TELLS IRAQI MILITARY IT WILL WITHDRAW" RTRS.

- The 2-Yr yield is up 1.6bps at 1.5405%, 5-Yr is up 1.5bps at 1.6042%, 10-Yr is

up 1.6bps at 1.8038%, and 30-Yr is up 3.3bps at 2.2772%.

TECHNICALS: 

US 10YR FUTURE TECHS: (H0) Bullish Focus  

*RES 4: 130-28+ High Oct 11

*RES 3: 130-17+ High Nov 1   

*RES 2: 130-04+ High Dec 3 and primary resistance

*RES 1: 129-21   Intraday high

*PRICE: 129-07+ @ 16:10 GMT, Jan 6

*SUP 1: 128-20   Low Jan 3

*SUP 2: 127-29   Low Dec 13 and bear trigger

*SUP 3: 127-18+ 1.618 projection of the Oct 3 to Nov 7 low from Dec 3 high

*SUP 4: 127-00   Round number support

US 10yr maintains a firmer posture following last week's gains. Futures have

breached a key resistance at 129-14, Dec 12 high. The break undermines the

recent bearish focus and instead signals scope for a climb towards 130-04+, Dec

3 high and the primary resistance. A breach of this level would represent a

significant technical break. First support has been identified at 128-20,

Friday's low. A move though this level would again open 127-29, Dec 13 low.

     AUSSIE 10-YR TECHS: (H0) Remains Capped by 50-dma 

*RES 3: 98.8950 - High Dec 10 and 11

*RES 2: 98.8500 - High Dec 18

*RES 1: 98.8163 - 50-DMA

*PRICE: 98.7750 @ 15:57 GMT, Jan 06

*SUP 1: 98.5700 - Low Jan 2 

*SUP 2: 98.5348 - 1.236 projection of Dec 5 - Dec 13 decline from Dec 18 high

*SUP 3: 98.4976 - 1.382 projection of Dec 5 - Dec 13 decline from Dec 18 high

Aussie 10yr futures failed to maintain the recent pace of gains Monday,

faltering at the 98.8162 50-dma before retracing slightly. This keeps the

outlook weak for now, confirming a resumption of the current bearish cycle that

has been in place since Nov 28. The focus is on a move towards 98.5348 and

98.4976 next, both Fibonacci projection levels. Firm short-term resistance has

been defined at the Dec-18 high at 98.8500.

TSY FUTURES CLOSE: Weaker, near late session lows as mkt fades current Mideast

rhetoric/risk-off tone, unwinding about a third of Fri's long end lead rally.

Update:

* 3M10Y  +0.468, 27.504 (L: 22.547 / H: 28.201)

* 2Y10Y  +0.35, 26.098 (L: 23.503 / H: 26.595)

* 2Y30Y  +2.167, 73.55 (L: 69.698 / H: 74.28)

* 5Y30Y  +1.936, 67.261 (L: 64.801 / H: 67.702)

Current futures levels:

* Mar 2-Yr futures down 1.125/32  at 107-25.5 (L: 107-24.75 / H: 107-28)

* Mar 5-Yr futures down 3/32  at 118-31 (L: 118-28.75 / H: 119-06.75)

* Mar 10-Yr futures down 4/32  at 129-8.5 (L: 129-05 / H: 129-21)

* Mar 30-Yr futures down 14/32  at 157-27 (L: 157-22 / H: 158-25)

* Mar Ultra futures down 35/32  at 184-26 (L: 184-17 / H: 186-27)

US EURODLR FUTURES CLOSE: Mildly bid, near middle session range on decent

volume, Blues-Golds outperforming. Current White pack (Mar'20-Dec'20):

* Mar 20 +0.010 at 98.280

* Jun 20 +0.010 at 98.360

* Sep 20 +0.010 at 98.435

* Dec 20 +0.005 at 98.460

* Red Pack (Mar 21-Dec 21) +0.005 to +0.010

* Green Pack (Mar 22-Dec 22) +0.010 to +0.015

* Blue Pack (Mar 23-Dec 23) +0.020

* Gold Pack (Mar 24-Dec 24) +0.020 to +0.025

US DOLLAR LIBOR: Latest settles

* O/N +0.0003 at 1.5370% (+0.0005 last week)

* 1 Month -0.0221 to 1.6921% (-0.0852 last wk)

* 3 Month -0.0016 to 1.8722% (-0.0708 last wk)

* 6 Month +0.0014 to 1.8943% (-0.0278 last wk)

* 1 Year -0.0092 to 1.9549% (-0.0403 last wk)

US SWAPS: Spds crushed amid surge in swappable corporate and supra-sovereign

issuance (>$22.5B) after weeks of inactivity. Aside from deal-tied hedging,

decent flurry two-way flow w/better receivers in 2s, 5s and 7s added to move.

Earlier swap-tied flow coming into the session includes better receivers in 2s,

3s, 8s and 9s, includes mixed fly action: 2s8s9s payer and 7s8s9s receiver flys.

Current spd levels:

Time (ET)   2Y Swap/Mid    5Y Swap/Mid   10Y Swap/Mid   30Y Swap/Mid

Mon 1500    -2.12/+6.50    -2.50/-0.56   -2.38/-6.00    -3.31/-34.56

1345        -2.25/+6.38    -2.38/-0.44   -2.06/-5.69    -3.00/-34.25

1115        -2.75/+5.88    -2.06/-0.12   -1.56/-5.19    -2.25/-33.50

1030        -2.25/+6.38    -1.94/+0.00   -1.88/-5.50    -2.25/-33.50

0915        -2.00/+6.62    -2.06/-0.12   -1.88/-5.50    -2.31/-33.56

Mon Open    -1.75/+6.88    -1.50/+0.44   -1.62/-5.25    -1.56/-32.81

Mon 0715    -1.38/+7.25    -0.94/+1.00   -1.38/-5.00    -1.50/-32.75

Fri 1500    -1.12/+9.06    -0.38/+2.12   -0.38/-3.56    -1.06/-31.25

STIR: Federal Reserve Bank of New York EFFR for prior session:

* Daily Effective Fed Funds Rate: 1.55%, volume: $79B

* Daily Overnight Bank Funding Rate: 1.54%, volume: $187B

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

* Secured Overnight Financing Rate (SOFR): 1.55%, $1.030T

* Broad General Collateral Rate (BGCR): 1.52%, $375B

* Tri-Party General Collateral Rate (TGCR): 1.52%, $350B

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

07-Jan 0830 Nov trade balance (-45.0B, -43.7B)

07-Jan 0855 04-Jan Redbook retail sales m/m

07-Jan 1000 Dec ISM Non-manufacturing Index (53.9, 54.5)

07-Jan 1000 Nov factory new orders (0.3%, -0.7%)

07-Jan 1000 Nov factory orders ex transport (0.2%, --)

07-Jan 1300 US Tsy $38B 3Y note (912828Z29) auction

PIPELINE: Starting to price

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

01/06 $3B *Enterprise Products Op (EPD) $1B each: 10Y +100, 31Y +145, 40Y +170

01/06 $2B *MetLife Global Funding, $1B each: 3Y +40, 3Y FRN SOFR+57

01/06 $900M *Duke Energy $500M 10Y +68, $400M 30Y +88

01/06 $750M *Kroger 30Y +170

01/06 $650M *Southern California Gas 10Y +77

Waiting to price

01/06 $2.55B #Mexico $1.75B +10Y +150, $800M 2050 Tap +175

01/06 $2.5B #Sumitomo Mitsui Fncl Grp ("SMFG") $1.25B each: 5Y +75, 10Y +95

01/06 $2.4B #Ford Motor Credit $1.5B 3Y +153, $900M 7Y +255

01/06 $2B #Home Depot $750M 10Y tap +62, $1.25B 30Y +90

01/06 $2B #BNP Paribas 11NC10 +125a 

01/06 $1.75B #Ntnl Australia Bank (NAB) $750M 3Y +43, $1B 3Y FRN L+41

01/06 $1.25B #BPCE 5Y +90

01/06 $1.25B #Santander UK, 3Y +57

01/06 $1.25B #GM Financial 5Y +132

01/06 $1.1B #John Deere Cap $550M 5Y +45, $550M 10Y +65

01/06 $1B #Export-Import Bank of India 10Y +150

01/06 $750m #Banco Del Estado de Chile 5Y +110

01/06 $600M #Southern California Edison $100M tap 10y +90, $500M 30Y +140

On Tap for Tuesday

01/07 $500M Kommunalbanken 2Y L+9a

01/07 $Benchmark EIB 5Y +11a

01/?? $Benchmark State of Israel 10Y, 30Y  roadshow

01/?? Additional chatter: Boeing, Heineken, T-Mobile

Eurodollar/Tsy options 

Eurodollar options:

* 10,000 Jun 81/82/83 put trees, 6.0 vs. 98.35/0.15%

* +10,000 Jun 83/86/88 call flys, 3.0

* -11,000 Apr/Jun 82 straddle spds, 2.25, June over on screen

* +6,500 Green Mar 82/83 put spds, 3.5

* +9,000 short Feb 82 puts, 1.0

* Update, over +20,000 (pit/screen) Mar 85/86/87/90 call condors, cab

* -3,000 short Sep 100 calls, cab

* 2,500 short Jun 83/87 1x2 call spds, 6.5

* 1,000 short Mar 81/82/86/87 call condors, 8.5

* +3,000 Feb 83 straddles 12.0 over Feb 85 calls

* +8,000 short Jun 91/93 2x3 call spds, 2.5

* +5,000 Green Mar 80 puts, 1.0 vs. 98.455/0.05%

* +6,000 Green Feb 81/82/87/88 call condors, 10.25 legged

Overnight screen trade, Blocks:

* 10,000 Mar 81 puts vs. 5,000 Jun 82/83 strangles

* 6,500 Mar 82/83 put spds

* >+11,000 Apr/Jun 82 straddle spds, 2.25

* Block, 40,000 Dec 86/88/90 call trees, 0.5

* Block, 20,000 Dec 86/88 1x2 call spds, 1.0

Tsy options:

* +2,500 wk2 TY 129.5 straddles, 40/64

* over 5,500 TUG 107.75 puts, 3.5/64 on screen

* Update, over -32,000 TYG 130.5/131.5/132.5 call flys, 5/64 on screen, closer

* 5,000 USG 157/161 strangles, 57/64 vs. 2,000 USG 159 straddles, 2-20/64, ratio

iron fly, 11/64

* 1,500 FVH 117/118.25/118.75 1x3x2 put flys, 12/64 net

* +2,500 TYG 130.25/131.25 1x2 call spds, 5/64 vs. 129-19.5/0.05%

* 1,400 TYG 128.5/129.25 3x2 put spds, 31/64

* >10,000 TYG 130.5 calls, 10- to 11/64 in small clips since the open

* -3,000 TYG 129.75 calls, 22- to 24/64

* -1,100 USG 158 puts, 54- to 53/64

Salient overnight trade, blocks:

* 8,200 TYH 131.5 calls, 13/64

* >22,000 TYH 131 calls, 20- to 21/64

* >21,000 TYG 129.5 calls, 28/64

* Block, 10,000 USH 156 puts, 51/64

* Block, 15,000 USH 155 puts, 34/64

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

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