US TSYS: TSYS WEAKER, US GOVT SHUTDOWN WATCH FOR MIDNIGHT

US TSYS SUMMARY: Tsys traded weaker all session, off session lows by the close

amid risk-on tone despite doubt over Senate vote averting US gov shutdown (read

4 week stop-gap/can-kicking). Equities higher/off midweek all-time highs (emini

+12.0, 2808.25), gold firmer (XAU +7.27, 1334.39).

- Little fanfare after 10Y yld blew through 2.62% late Thu to 2.6444% high Fri.

Light data day, focus on whether US Senate will pass another stopgap spending

bill, avoiding Fri midnight shutdown. Fed enters blackout period Saturday

- Little react to Bbg/Mich sentiment miss 94.4; flow included technical selling

as 10Y yld crosses 2.635% again, modest curve unwinds by fast$ adding to

pressure in long end.

- Swap curve steepened as long end surged off deeper inversion on hopes of

easing bank regulations/softer leverage ratios. deal-tied paying ahead expected

supply next week, sources note some receiver unwinds out the curve with specs

putting on tactical wideners to get ahead of further dis-inversion. 

- Decent option trade, ongoing interest in hedging 2-4 hikes in 2018, 2019

- Late ylds: 2Y 2.056%, 3Y 2.188%, 5Y 2.434%, 7Y 2.566%, 10Y 2.637%, 30Y 2.911%

US TSY FUTURES CLOSE: Lower by the bell/off lows -- under pressure all session

amid risk-on tone despite doubt over Senate vote averting US gov shutdown (read

4 week stop-gap/can-kicking). Latest curve update:

* 2s10s +0.035, 57.845 (59.064H/56.289L); 

* 2s30s -0.217, 85.362 (87.928H/84.217L);

* 5s30s -0.690, 47.664 (50.306H/47.513L); 

Current futures levels:

* Mar Ultra bonds down 22/32 at 162-19 (162-06L/163-06H)

* Mar 30-yr Bond futures down 13/32 at 149-01 (148-20L/149-12H)

* Mar 10-yr futures down 5.5/32 at 122-09 (122-07L/122-16H)

* Mar 5-yr futures down 3.75/32 at 115-04.75 (115-04L/115-08.75H)

* Mar 2-yr futures down .75/32 at 106-23.75 (106-23.25L/105-24.75H)

US EURODOLLAR FUTURES CLOSE: Lower across the strip by the bell, sitting on

session lows w/long end underperforming. Current White pack (Mar'18-Dec'18):

* Mar'18 -0.005 at 98.145

* Jun'18 -0.005 at 97.935

* Sep'18 -0.005 at 97.800

* Dec'18 -0.005 at 97.680

* Red pack (Mar'19-Dec'19) -0.010-0.040

* Green pack (Mar'20-Dec'20) -0.045-0.060

* Blue pack (Mar'21-Dec'21) -0.060-0.065

* Gold pack (Mar'22-Dec'22) -0.065-0.070

US SWAPS: Long end spds gapped wider in the first half, spd curve steepening

sharply as the 30Y spd climbed to least inverted levels since March 2015 (30Y

spd +3.5 to -12.75 high). Swap sources said move related to chatter that the Fed

is nearing final proposals to soften bank leverage ratio rules, softening Basel

capital requirements to give banks more freedom. Speaking at an American Bar

Assn conf Fri afternoon, VC for supervision Fed Board of Gov's Randy Quarles

touched on just that: easing bank regs, leverage ratios, bye bye Basel? Not yet,

but door is cracked open -- long end swap spds held near earlier wides. Aside

from two-way flow in the short end, and deal-tied paying ahead expected supply

next week, sources note some receiver unwinds out the curve with specs putting

on tactical wideners to get ahead of further dis-inversion. Latest spread

levels:

* 2Y  -0.25/20.25

* 5Y  +1.19/7.31

* 10Y +2.50/+3.81

* 30Y +3.50/-12.75

PIPELINE: Slow day after appr $65B priced from Tuesday-Thursday, highest volume

in a year

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

01/19 $1.4B *Meredith Corp 8NC3 Sr notes

01/19 $Benchmark CPPIB Capital Aaa/AAA, 144a/Reg-S 3Y

01/19 Chatter $15B Celgene (CELG)

01/19 Chatter Export-Import Bank of India (EXIMBK) Baa2/BBB-

01/19 Chatter Petroleos Mexicanos (PEMEX) Baa3/BBB+, rumored $7.5B

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

- Jan 20 Fed media blackout period begins Saturday

- Jan 22 Chicago Fed National Activity Index (0.15, --) 0830ET

- Jan 22 $48B Tsy 13W bill auction, 1130ET

- Jan 22 $42B Tsy 26W bill auction, 1130ET

Eurodollar/Treasury Option Summary

Eurodollar options, Pit/screen:

* 6,000 Apr 78/80/81 2x3x1 call flys, 2.0/wings over

* +25,000 Mar 82/83 1x2 call spds, 0.5

* +12,000 short Mar 75 puts, 2.5 vs. 97.585/0.10%

* +10,000 Mar 82/83 1x2 call spds, 0.5vs. 98.15/0.05%

* +15,000 Red Dec 67/70 2x1 put spds, cab/legged earlier

* 6,500 Jun 78/Green Jun 70 2x1 put spds, 3.0

* 2,000 short Feb 76/Green Feb 73 straddle spds, 3.5

Block, 1029:23ET,

* 10,000 Jul 81 calls, 1.0, midmarket

* +2,500 Blue Mar 78 calls, 0.5

* -4,000 Apr 77/78/80 2x3x1 put flys, 4.25/wings over

* +4,000 Apr 78 puts 1.0 over the Feb 81 puts

* total +37,500 Green Apr 71 puts, 2.0-2.5

* +3,000 Green Apr 76 calls, 3.5

* -2,500 Green Feb 71/73 2x1 put spds, 3.5

* +10,000 Blue Jun 67/70 put spds, 3.0

* +5,000 Blue Apr 72/73 strangles .5 over the short Apr 75 straddle

* total -20,000 Blue Sep/Blue Dec 70/73 put spd strip, 30.5

* -2,500 Blue Dec 75/77/80 call trees, 3.0 vs. 97.31/0.10

* 4,250 Red Mar19 70/72/75 2x3x1 put flys, 3.0 net

* 4,000 Green Mar 72/75 put spds, 1.5 vs. 97.43/0.10%

* screen, +16,000 Green Mar 71/73 2x1 put spds

Block, 0757:51ET

* 6,666 Jul 76 puts, 1.0

* 5,000 Jul 77 puts, 6.0

* 5,000 Jul 80 calls, 2.5

Block, 0644:34ET

* 7,500 Jun 78/80 put spds, 7.5 vs. 97.925/0.25% -- better sellers last couple

weeks, outright and on spd vs. short Jun 75/76 put spds as a synthetic steepener

Tsy options, Pit/screen:

* 1,600 USJ 144/148 2x1 put spds, 44/64

* 1,250 TYH 122/123 strangles, 45/64

* 1,000 TYJ 123.5/125/126.5 call flys, 8/64

* -3,500 TYJ 120/123.5 strangles, 26/64

* 1,000 FVH 114.25/114.75/115/115.25 put condors, 2/64

* total +8,200 TYH 125 calls, 3/64

* total +4,500 USH 151/153 1x2 call spds, 9- to 11/64

* +5,300 TYH 125 calls, 3/64 vs. 122-18, ongoing buyer/adding to position

* 1,000 TYG 121.7 puts, 5/64 vs. 122-13

* 1,000 TYH 121.5/124.5 strangles, 19/64 vs. 122/13/0.20%

* +4,000 TYH 120/121.5 put spds 4/64 over TYG 122.5 puts

* 2,000 TYJ 12/124 put over risk reversals, 1/64 vs. 120-00.5

* -1,500 TYH 122.5 straddles, 1-8/64 after large buying at 1-6/64 late Thu

* 1,000 USH 151/153 1x2 call spds, 11/64

* >27,000 TYG 122 puts, 9/64

* >23,000 TYG 121.75 puts, 6/64

* >?15,000 TYG 121.5 puts, 3

Block, 0738:46ET

* +4,000 TYH 122/123 put spds, 33/64

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

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