US TSYS: US STILL TARIFF HEADLINE SENSITIVE; BREXIT SECONDARY

US TSY SUMMARY: Rates mildly mixed after the bell, long end underperforming,

short end Eurodlr futures under duress later in second half. Gist of day: while

Brexit debate and resignation watch was US$ positive earlier, US mkts insulated

for much of session. What really gets domestic markets moving is trade tariff

headlines.

- Decent risk-on move w/equities making new session highs after Lighthizer

comments that some tariffs already on hold (denied late in day). Good feeling

gone late -- risk-on scaled back after Trump admin Ross headline: "U.S. STILL

PLANS CHINA TARIFF INCREASE TO 25% IN JANUARY" bbg.

- Heavy volume day (TYZ>2.2M), two-way flow on net, curve steepener theme

maintained, but off highs (5s30s +1.72 at 42.55); 5s30s steepener Block

1351:22ET (+11,430 FVZ 112-20.25 buy through -19.5 post time offer vs.

* -3,000 USZ 138-26, bid). Heavy Eurodlr, Tsy option flow. Friday: Industrial

Production (0.0%) and Capacity Utilization (78.1%) rounds out the week. Tsy

cash/ylds: 2Y 100-01 (2.854%), 5Y 99-23 (2.935%), 10Y 100-04 (3.109%), 30Y

100-08.5 (3.359%).

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

volume (TYZ 2.15M); curves mixed; update:

* 2s10s -0.404, 25.050 (24.328L/25.941H);

* 2s30s +0.661, 50.284 (48.133L/51.284H);

* 5s30s +1.393, 42.222 (39.659L/43.201H);

Current futures levels:

* Dec Ultra bonds down 04/32 at 150-12 (149-29L/151-03H)

* Dec 30-yr Bond futures up 02/32 at 138-30 (138-18L/139-14H)

* Dec 10-yr futures up 4.5/32 at 118-28.5 (118-19.5L/119-03H)

* Dec 5-yr futures up 03/32 at 112-20.25 (112-14.5L/112-24.5H)

* Dec 2-yr futures up 0.75/32 at 105-12.5 (105-10.75L/105-14.25H)

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

the middle of the range; strong volume. Current White pack (Dec'18-Sep'19):

* Dec'18 -0.015 at 97.245

* Jun'19 0.000 at 97.125

* Jun'19 0.000 at 96.995

* Sep'18 0.000 at 96.915

* Red pack (Dec'19-Sep'20) +0.010-EVEN

* Green pack (Dec'20-Sep'21) +0.015-0.010

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

* Gold pack (Dec'22-Sep'22) +0.015-0.010

US DOLLAR LIBOR: Latest settles, 

* O/N +0.0036 to 2.1797% (+0.0043/wk)

* 1 Month -0.0078 to 2.3025% (-0.0119/wk)

* 3 Month +0.0110 to 2.6400% (+0.0219/wk)

* 6 Month -0.0032 to 2.8602% (+0.0022/wk)

* 1 Year -0.0113 to 3.1183% (-0.0257/wk)

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

* Secured Overnight Financing Rate (SOFR): 2.20% vs. 2.20% prior, $803B

* Broad General Collateral Rate (BGCR): 2.17% vs. 2.17% prior, $440B

* Tri-Party General Collateral Rate (TGCR): 2.17% vs. 2.17% prior, $415B

US SWAPS: Spds hold mostly wider, spd curve extends flatter w/wings on

respective session range limits. Corp issuance hedging playing limited role in

short end. Otherwise flow over the last couple hours includes modest 2-way in 2s

around 3.0329-.0413%, rate payer in 4s at 3.062%, two-way in 10s between

3.1565-3.1775%, and 2s5s10s receiver fly. Latest spd levels:

* 2Y +0.75/19.75

* 5Y +0.38/14.50

* 10Y +0.06/6.44

* 30Y -0.44/-10.62

PIPELINE: PRICED $1b NWB 3Y MS +6

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

11/15  $1B *NWB 3Y MS +6

11/15  $750M *CAF 5Y MS +79

11/15  $620M *The Government of Bermuda Long 10Y +175

OUTLOOK: 

- Nov 16 NY Fed Business Leaders Index (9.4, --) 0830ET

- Nov 16 Industrial Production (0.3%, 0.1%) 0915ET

- Nov 16 Capacity Utilization (78.1%, 78.1%) 0915ET

- Nov 16 Advance NSA Service Revenue 1000ET

- Nov 16 BLS state payrolls 1000ET

- Nov 16 Nov Kansas City Fed Mfg Index (8, --) 1100ET

- Nov 16 Q4 St. Louis Fed Real GDP Nowcast (2.9%, --) 1100ET

- Nov 16 Q4 NY Fed GDP Nowcast (2.7%, --) 1115ET

- Nov 16 Chi Fed Pres Evans, moderated Q&A/FI Forum, Q&A, IL 1130ET

- Nov 16 Sep net TICS flows 1600ET

- Nov 16 Sep long term TICS flows 1600ET

Eurodollar/Treasury Option Summary

Eurodollar options, Pit/screen:

block, 14:06:46ET

* +10,000 Dec 70/71 put sprd at 0.5 w/another 10k in pit

block, 13:47:35ET

* 10,000 Short Dec 70 calls at 3.5 vs 9688/0.25%, note earlier -55k sold at 3.5

covered 9687.5

* 10,000 Short Dec 67/68 2x1 put sprd at 3, note earlier -10k sold at 2.5

* over -75,000 Short Dec 70 calls at 3.0-3.5 vs 9687.5/0.25%

* over +40,000 Green Mar 66 puts at 5.5 vs 9690.5/0.23%

* 5,000 Dec 71 puts at 0.5 vs 9723/0.02%

* 4,000 Short Nov/Green Nov 67 put sprd at 0

* 30,000 Jun 75 calls at 2.5 vs 9703/0.10%

* 15,000 Green Jun/Blue Sep 68 Straddle Sprd at 7.5

Total -20,000 Short Dec 65/66/67/68 put condor at 4.5 vs 9690/0.10%

Total 5,500 Short Jan 67/68 2x1 at 1

* 5,000 Short Jan 67/68 2x1 at 1

* 6,000 Short April 62/65 put sprd at 2.5 vs 9686.5/0.10%

* 5,000 Short Dec 65/66/67/68 put condor at 4.5 vs 9690/0.10%

* 4,000 Short Nov 68 calls at 3 vs 9688.5/0.52%

* 3,000 Green Dec 67 puts at 3 vs 9690/0.22%

* 5,000 Short Mar 70 calls at 11 vs 9688/0.38%

* -10,000 Short Dec 67/68 2x1 put sprd at 2.5

* 5,000 Green Sep 76/81 call sprd at 5

Sources say +80,000 Blue Sep 80 calls at 4

* 5,000 Short Mar 66/67 put sprd at 4 vs 9689.5/0.10%

* 4,000 Short Dec 66/67/68 put fly at 3.5

Tsy options, Pit/screen:

### POV, PARSING MASSIVE 10Y OPTION FLOW

* Over -137,000 TYF 121 calls sold at 5/64. Taken alone, sale is an opener

w/open interest coming into the session only 25,997. NOT a lot of gravy on the

sale -- opening a massive unlimited upside risk call sale for only 5/64 profit

potential. That said, Jan options EXPIRE on December 21, after the final 2018

FOMC and well before the Jan'19 29-30 FOMC. In context, however, sale could be

vs. heavy TYG call buying from a week ago (+20k 122/123.5 1x2c spds, >+65k

118.5c, >35k 119c).

- Or conversely, could be legged sale vs. large buying >60,000 TYF 119.5 calls

today, or vs. the heavy contingency of TYZ calls traded outright and on spd

(59,000 TYZ 119.25 calls, from 11- to 9/64; -10,000 TYZ 119/119.5/120/120.5 call

condors, 6/64 more recently). One trader even suggests the call sale could be a

cross asset curve trade vs. buy of some 80,000 Blue Sep Eurodlr 80 calls 4.0 

- Policy tie-in, rate hike probability for Dec 17-18 FOMC has risen to mid-80%

(MNI PINCH model). Fed ch Powell came out less hawkish last night, but remains

in hawk camp, majority of dealers still est 3-4 hikes next year.

Recent FOB (Five over Bonds) synthetic flattener (duration weighted)

* +8,000 FVF 112.5 puts, 20/64 vs. 112-19.5 vs.

* -2,650 USF 137 puts, 41/64 vs. 138-16

* +5,000 TYZ 118.25/118.75 2x1 put spds, 5/64 (large >115k offer remains)

* +20,000 FVZ 112.75/-FVF 113 call diagonal at 5.5

* -10,000 TYZ 119/119.5/120/120.5 call condors, 6/64 vs. 118-29 in pit

* +4,000 wk5 TY 117.25/117.75/118.25 put flys, 3/64

* just over 59,000 TYZ 119.25 calls, from 11- to 9/64 last few minutes (OI

33,095 coming into session)

* over 58,000 TYF 119.5 calls, 21/64

* Update, over -121,000 TYF 121 calls, 5/64 (open interest only 25,997 coming

into session)

* just over +32,000 TYF 121 calls over last 45 minutes at 5/64

* 2,300 TYZ 117.5/118 3x1 put spds, 0.0

Highlight overnight trade includes

* >23,000 TYZ 119 calls

* >17,000 TYZ 119.5 calls

* >12,000 TYZ 117.5/118 put spds, from 2- to 4/64

* 11,000 TYF 120.5 calls, 8/64

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

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