US TSYS: US GOV SHUTDOWN END IN SIGHT?

US TSYS SUMMARY: Tsys finish weaker by the close, off session lows. Rates pared

midday gains on as Senate voted to pass shutdown resolution to House, expected

to vote today, pundits expect US Gov back to business -- at least until Feb 8.

US$ index had rallied off lows ahead reports of agreement, DXY pared move to

near steady as Senate voted to advance bill.

- Equities held strong gains/new all-time highs, Dow Indu new high of 26164.72,

emini +16.0 to 2827.0; gold firmer (XAU +1.52, 1333.38), oil firmer (WTI +0.12,

63.49 vs. 64.14H). Heavy Eurodlr option put volume; modest deal-tied hedging.

- Tsys opened weaker, off O/N lows on what was widely expected to be slow start

to wk as mkts awaited word of US gov shutdown. 10Y yld tapped 2.6685% early

overnight. Heavy buying front Mar18 Eurodollar futures +90k 98.155 (+0.010),

short end supported after 3M LIBOR slipped -0.0032 to 1.7413% (+0.0230 last wk).

Orderly 2way flow on net.

- Very large TUH/FVH steepener Block (+35.9k TUH vs. -30.4k FVH) early in second

half. Swap spds tighter, pare fraction Fri's gap wider 

- Late ylds: 2Y 2.069%, 3Y 2.204%, 5Y 2.458%, 7Y 2.589%, 10Y 2.661%, 30Y 2.925%

US TSY FUTURES CLOSE: Finish weaker by the close, off session lows, curves

rebounded. Rates pared midday gains on as Senate voted to pass shutdown

resolution to House, expected to vote today, pundits expect US Gov back to

business -- at least until Feb 8. Latest curve update:

* 2s10s -0.430, 58.605 (59.136H/56.564L);

* 2s30s -1.328, 85.096 (86.488H/83.312L);

* 5s30s -1.757, 46.472 (48.537H/45.917L);

Current futures levels:

* Mar Ultra bonds down 12/32 at 162-07 (161-23L/163-00H)

* Mar 30-yr Bond futures down 9/32 at 148-23 (148-12L/149-09H)

* Mar 10-yr futures down 5.5/32 at 122-03.5 (122-01.5L/122-11.5H)

* Mar 5-yr futures down 3.25/32 at 115-01.5 (115-00L/115-05.5H)

* Mar 2-yr futures down .5/32 at 106-23 (106-22.5L/106-23.75H)

US EURODOLLAR FUTURES CLOSE: Steady/mixed in the short end to progressively

lower out the strip/at-near session lows. Heavy buying front quarterly early

(+90k 97.155), Block buying Red packs (EDH9=EDZ9). Current White pack

(Mar'18-Dec'18):

* Mar'18 +0.005 at 98.150

* Jun'18 +0.005 at 97.940

* Sep'18 +0.000 at 97.795

* Dec'18 -0.010 at 97.665

* Red pack (Mar'19-Dec'19) -0.020-0.030

* Green pack (Mar'20-Dec'20) -0.035

* Blue pack (Mar'21-Dec'21) -0.030-0.035

* Gold pack (Mar'22-Dec'22) -0.035

US SWAPS: Spds running mostly tighter, well off early narrows by the close, spd

curve steepening out later in second half even as Tsys pared gains as US Gov

shutdown looks to be headed for a short term resolution, House to vote tonight.

Light mixed flow on net, less deal-tied hedging compared to last week. Front end

flatteners and two-way fly action in the intermediates. Early, bit of a reversal

after long end gapped wider, sources reported  rate and spd receiving in 10s,

prop receiver/payer unwind 30s. OTC vols receded as rates held to lower/narrow

range after making first half attempt to rally. Heavy low delta put buy volume

on day. Latest spread levels:

* 2Y  +0.38/20.44

* 5Y  -0.25/7.50

* 10Y -0.94/+5.62

* 30Y -0.75/-11.44

PIPELINE: $1.75B 2-tranche Bank of BY Mellon and $1B M&T Trust 2-tranche launch

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

01/22 $1.75B #Bank of NY Mellon; $1B 5Y +53, $750M 10Y +75

01/22 $1B #M&T Trust $650M 3Y Fxd +47, $350M FRN 3mL+27

01/22 $400M *Korea Southern Power (KOSOPW) Aa2/na/AA-, 3Y +90

01/22 $2.5B T-Mobile between 8- and 10Y tranches today

01/22 $1B Nordic Investment WNG 3Y 

01/22 $Benchmark CPPIB Capital (CPPIBC) Aaa/AAA 144a/Reg-S 3Y

01/22 $Benchmark CADES 3Y; IPT MS+14A Tuesday

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 23 Jan Philadelphia Fed Nonmfg Index (29.4, --) 0830ET

- Jan 23 20-Jan Redbook retail sales m/m (-0.3%, --) 0855ET

- Jan 23 Jan Richmond Fed Mfg Index (20, --) 1000ET

- Jan 23 Dec BLS state payrolls (208.9k, --) 1000ET

- Jan 23 $26B Tsy 2Y note auction 1300ET

- Jan 23 Jan Treasury Allotments (p) 1500ET

- Jan 23 Chicago Fed Pres Evans introductory remarks of Michael Moskow during

"Chicago Council on Global Affairs Conference: Future of Monetary Policy:

Embracing the Unconventional" Chicago, 1830ET. No discussion of monetary policy

by Evans, Fed in Blackout period

Eurodollar/Treasury Option Summary

Eurodollar options, Pit/screen: adding to heavy downside put buying covering

rate hikes in '19-'20 (Green Jun options are 2Yr midcurve options that expire

same time as front June options, not the longer time to expiry long Green June

options).

* 12,000 Red Dec'19 67/70 put spd, 5.5 vs. 97.365/.10%

* total +25,000 short Apr 73/75 put spds 2.5-3.0 over short Apr 77 calls covered

* Update, total +100,000 short Jun 72/73 put spds with

* Update, total +100,000 Green Jun 70/71 put spds, 6.0 total debit

* +7,750 short Dec/Red Dec 71/75/77 put fly strip, 72.0

* +5,000 Dec 71/72/73 put flys, 1.0

* +15,000 short Apr 73/75 put spds 2.5 over the short Apr 77 calls vs.

97.52/0.40%

* +15,000 long Green Jun 62/67 2x1 put spds at 3.5 earlier

* screen 10,200 short Feb 76 straddles 

* +11,000 Dec 71/72/73 put flys, 1.0 vs. 97.67 to -.675

* +1,000 Sep 75/76/77/788 put flys, 5.5

* +1,000 Jun 76/Sep 73/Dec 70/Red Mar'19 66 put strips, 1.0 (cab/each leg)

* total +45,000 Mar 73/75 put spds .5 over Mar 80 calls in the pit, adds to

+125k Block buys

* +5,000 Green Mar 72/73 2x1 put spds, screen

* +10,000 Red Mar'19 70/72 2x1 put spds, 2.0

* 10,000 Green Mar 73/76 1x2 call spds, 5.0 vs. 97.38/0.22%

* -20,000 green Feb72/73/75 put flys, 5.0

* -1,000 Blue Feb/Blue Mar 73 straddle strip 35.5

BLOCK, 0934:04, midmarket

* total 20,000 Blue Jun 78 calls, 2.0 vs. 97.26/0.10%

* +80,000 short Jun 72/73 put spds with

* +80,000 Green Jun 70/71 put spds, 6.0 total debit

* +15,000 Mar 73/75 put spds, .5 over Mar 80 calls, adds to +125k Blocks

* -5,000 Jun 77 puts, 0.5Blocks, 0830:26-:29ET, adds to prior Blocks for 125k

total

* another +25,000 Red Mar'19 73/75 put spds, 5.0 vs. Mar 80 calls, 4.5 vs.

futures

* total 7,500 EDH9 97.595 hedge this time around

* +100,000 EDH9 73/756p spd 0.5 over EDH9 80 calls, Block

* +15,000 short Mar 76/80 3x1 put spd,15.0 Block/screen

* +50,000 short Dec 70 puts, 6.5

* -10,000 Sep 78/80 put spds, 9.5

Blocks, 0709:22-0710:15ET, adds to prior Blocks for 100k total

* another 25,000 Red Mar'19 73/75 put spds, 5.0 vs. Mar 80 calls, 4.5.

Tsy options, Pit/screen:

* 2,000 TYJ 120/123.5 strangles, 25/64

* 2,500 FVG 114.7/115 2x1 put spds, 2/64 vs. 115-03.5

* +4,250 FVH 115.25/115.75 1x2 call spds, 3.5/64 vs. 115-01.5

* 2,000 TYH 122.5/123 put spds, 21/64 vs. 122-05

* 3,000 TYG 123.5/TYH 122 call spds, 43/64 vs. 122-07.5

* +5,700 TYH 125 calls, 2/64 ongoing buyer adding to upside call position

* 2,500 TYG 121.5/122 2x1 put spds, 4/64 vs. 122-05.5

* +1,600 FVH 117 calls, 1/64

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

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