US TSYS: VIRUS ANGST MODERATES, RISK-OFF UNWIND AHEAD FOMC

US TSY SUMMARY: Risk-off unwind theme, squaring ahead Wed's FOMC rate annc, mkt

concerns over Wuhan virus' sprd normalizing slightly despite report of new case

in France. Yld curves steeper, rebounding after Tsys reversed early gains.

- Futures were trading stronger during London morning after headlines that Hong

Kong to limit mainland flights and shut high-speed rail spurred gap bid (early

October low ylds: 10YY tapped 1.5685; 30YY 2.0211% low), but unwinds triggered

just ahead NY open on some headlines attempting to squelch concerns over

severity of and potential for epidemic. 

- Flow included two-way from props and fast$ in 2s-5s, option-tied selling in

10s, real$ selling 30s. On earlier bid, bank portfolio and real$ were buyers of

intermediates to long end, swap-tied sellers in 2s and 10s. $6.25B corp issuance

hedging from 3s out to 50s. US Tsy $32B 7Y Note auction tailed: 1.570% award vs.

1.567% WI. Large steepener block: +14,236 FVH 119-20 through the 119-20.25

post-time bid vs. -2,018 WNH 190-18 WAY through the 190-23 post time bid. 

- The 2-Yr yield is up 1.8bps at 1.4585%, 5-Yr is up 2.8bps at 1.4693%, 10-Yr is

up 4bps at 1.6476%, and 30-Yr is up 4.3bps at 2.0995%.

TECHNICALS:

US 10YR FUTURE TECHS: (H0) Bullish Conditions Hold  

*RES 4: 132-02+ High Oct 3 and Oct 7

*RES 3: 131-27+ High Oct 10 

*RES 2: 131-11+ 1.382 projection of Jan 2 - Jan 8 rally from Jan 9 low

*RES 1: 131-06   Intraday high

*PRICE: 130-18 @ 16:44 GMT, Jan 28

*SUP 1: 130-17   Low Jan 27 and gap high

*SUP 2: 129-17+ Low Jan 23

*SUP 3: 129-12   Low Jan 22

*SUP 4: 128-29   Low Jan 17 and key near-term support 

10yr futures maintain a firmer tone with further gains seen likely near-term

given that risk-aversion remains at elevated levels. The technical condition is

bullish too and this was reinforced by yesterday's break of former resistance at

130-17+, Nov 1 high. The focus is on further upside towards 131-11+ and 131-19

next, both Fibonacci projections. Initial support lies at 130-17, yesterday's

low.

JGB TECHS: (H0): Consolidates

*RES 3: 153.55 - High Nov 28 and key resistance

*RES 2: 153.11 - High Dec 4

*RES 1: 152.70 - High Jan 27

*PRICE: 152.48 @ 16:43 GMT, Jan 28

*SUP 1: 151.62 - Contract lows, Dec 20

*SUP 2: 151.11 - 76.4% retracement of August 2018 - September 2019 Rally

*SUP 3: 150.52 - 1.0% lower 10-dma envelope

Having topped Fib resistance last week, markets secured a close above the

50-dma, opening further gains in the near-term. The Jan 6 high at 152.62 gave

way with relatively little effort, shifting upside targets to the early Dec

highs at 153.11. This counters the bearish signals in present over the past

fortnight or so, shifting focus to the late November highs and the 200-dma. To

the downside, bears could gain a firmer footing on a move through the 152.00

handle.

TSY FUTURES CLOSE: Squaring up ahead Wed's FOMC rate annc, futures weaker but

off session lows after the bell on heavier volume (TYH>2M) as market concerns

over Wuhan virus' spread normalizing slightly despite report of new case in

France. Yld curves steeper, rebounding after Tsys reversed early gains. Update: 

* 3M10Y  +1.006, 7.224 (L: 0.95 / H: 9.367)

* 2Y10Y  +1.938, 18.243 (L: 15.824 / H: 19.357)

* 2Y30Y  +2.504, 63.68 (L: 60.838 / H: 64.903)

* 5Y30Y  +1.524, 62.89 (L: 61.069 / H: 63.441); Current futures levels:

* Mar 2-Yr futures down 1.75/32 at 107-30.25 (L: 107-29.625 / H: 108-01.625)

* Mar 5-Yr futures down 4.25/32 at 119-21.25 (L: 119-18.75 / H: 119-31)

* Mar 10-Yr futures down 8.5/32 at 130-20 (L: 130-16 / H: 131-06)

* Mar 30-Yr futures down 22/32 at 161-11 (L: 161-02 / H: 162-25)

* Mar Ultra futures down 1-11/32 at 190-28 (L: 190-10 / H: 193-14)

MONTH-END EXTENSIONS: Preliminary Bloomberg-Barclays US month-end index

extension/forecast summary compared to the average increase for the past year

and the same time in 2019; TIPS 0.15Y; Govt inflation-linked, 0.23.

*.....................Projected...1Y Avg Incr..Last Year

*US Tsys.................0.07........0.08........0.06

*Agencies................0.01........0.09........0.07

*Credit..................0.08........0.09........0.12

*Govt/Credit.............0.07........0.08........0.08

*MBS.....................0.06........0.07........0.04

*Aggregate...............0.07........0.08........0.07

*Long Govt/Credit........0.05........0.09........0.07

*Interm Credit...........0.07........0.08........0.09

*Interm Govt.............0.06........0.08........0.06

*Interm Govt/Cred........0.07........0.08........0.07

*High Yield..............0.06........0.07........0.02

US EURODLR FUTURES CLOSE: Weaker/off lows by the bell, reversing about half

Mon's heavy risk-off support. Current White pack (Mar'20-Dec'20):

* Mar 20 -0.015 at 98.295

* Jun 20 -0.025 at 98.390

* Sep 20 -0.030 at 98.495

* Dec 20 -0.035 at 98.530

* Red Pack (Mar 21-Dec 21) -0.04 to -0.035

* Green Pack (Mar 22-Dec 22) -0.035

* Blue Pack (Mar 23-Dec 23) -0.04 to -0.035

* Gold Pack (Mar 24-Dec 24) -0.045 to -0.045

US DOLLAR LIBOR: Latest settles

* O/N +0.0013 at 1.5330% (+0.0011/week)

* 1 Month +0.0008 to 1.6500% (-0.0095/wk)

* 3 Month -0.0050 to 1.7695% (-0.0259/wk)

* 6 Month -0.0125 to 1.7710% (-0.0343/wk)

* 1 Year -0.0060 to 1.8313% (-0.0487/wk)

US SWAPS: Spds running wider, off wides by the bell with short end resisting

move. Deal-tied paying driver, some some risk-off position squaring adding to

move. Current levels:

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

Tue 1500    +1.38/+6.38    +0.56/-0.19   +0.44/-5.25    +0.25/-31.75

1200        +1.38/+6.38    +0.62/-0.12   +1.00/-4.69    +0.75/-31.25

1000        +1.75/+6.75    +0.81/+0.06   +0.81/-4.88    +1.00/-31.00

Tue Open    +1.75/+6.75    +0.75/+0.00   +0.75/-4.94    +0.94/-31.06

Mon 1500    -1.25/+4.50    -1.25/-0.75   -0.69/-5.75    -1.12/-32.38

Mon Open    -0.75/+5.00    -1.00/-0.50   -1.19/-6.25    -1.25/-32.50

Monday recap: Spds running tighter by the bell, directional w/ Tsy ylds, spds

are at/near lows w/2s-5s extending move late. moderate flow includes spec acct

payer unwinds in 2s-5s in second half, limited deal-related flow as issuers ply

the sidelines on risk-off move in rates.

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

* Daily Effective Fed Funds Rate: 1.55%, volume: $70B

* Daily Overnight Bank Funding Rate: 1.54%, volume: $179B

US TSYS: REPO REFERENCE RATES: No release

* Secured Overnight Financing Rate (SOFR): 1.53%, $1.051T

* Broad General Collateral Rate (BGCR): 1.51%, $392B

* Tri-Party General Collateral Rate (TGCR): 1.51%, $381B

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

29-Jan 0700 24-Jan MBA Mortgage Applications (-1.2%, --)

29-Jan 0830 Dec advance goods trade gap (-$63.2B, -$65.0B)

29-Jan 0830 Dec advance wholesale inventories (-.01%, 0.1%)

29-Jan 0830 Dec advance retail inventories (-0.8 revised, 0.1%)

29-Jan 1000 Dec NAR pending home sales index (108.5, --)

29-Jan 1030 24-Jan crude oil stocks ex. SPR w/w

29-Jan 1300 FOMC announcement

PIPELINE: Fifth Third and Huntington Union join Union Pacific launch

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

01/28 $3B #Union Pacific $500M 7Y +60, $750M 10Y +80, $1B 30Y +115, $750M 50Y

+165

01/28 $1.25B #Fifth Third Bank $650M 3Y +38, $600M 7Y +70

01/28 $1.25B #Huntington Ntnl Bank $500M 3Y +38, $750M 10Y +95

01/28 $750M #Nevada Power WNG $425M 10Y +78, $300M 30Y +102

Eurodollar/Tsy options 

Eurodollar options:

* -15,000 Apr 85 calls, 3.0 vs. 98.395/0.30%, ongoing sellers up to appr -50k

total includes blocks

* +10,000 Sep 81/82 put spds, 1.25

* -3,500 Green Feb 87/88/90 call trees, 1.0

* +8,000 Mar 81/82 put spds, 1.25

* +10,000 Sep 85 straddles, 27.0

* +3,000 Feb 82 straddles, 6.25

* +9,000 Sep 80/82/83 broken put flys, 3.0

* -7,000 May 81/82/83/85 call condors, 7.75

* -5,000 short Feb 85 puts, 1.0

* +5,000 Blue Feb 85/86 strangles, 9.5

* +6,500 Green Mar 82/85 2x1 put spds, 2.0

Blocks, 0921-0932ET, adds to -10k in pit

* -20,000 Apr 85 calls, 3.25 vs. 98.40/0.30%

* -5,000 Jun 83/87 call spds, 7.5

* +5,000 Apr 82/83 2x1 put spds, 3.75

* -5,000 Mar 83/85 call spds, 1.25

* 2,000 Jun/Sep 82/83 put spd spd, 0.5

Salient screen trade heading into the NY open

* -22,500 Apr 82 puts, 0.75

* over 37,000 Mar 83 calls, 2.25-2.5, some on spd vs. Mar 86 calls

* 5,000 Sep 80/82/83 broken put flys

* over 12,000 Green Mar 82 puts, some on spd vs. Green Mar 85 puts

Tsy options:

* +10,000 TYH 129.25 puts, 9- to 10/64

* 2,000 TYH 130.75 calls, 35/64

* 3.7k TYJ 128.5 puts, 15/64

* +4,000 TYJ 127/131 strangles w/ TYH 128/130 strangles, 417-421

* 7,300 TYH 130.75 straddles, 1-12/64 on screen

* -6,500 TYH 131.5 calls vs. TYJ 133.5 calls, 7/64 cr

* +8,000 FVJ 118.75 puts, 7/64

* -4,600 USH 153 calls vs. USJ 156 calls, 328cr

* -2,500 FVH 119.5 calls, 29/64

* +7,000 USH 160 puts, 41- to 45/64

* -2,500 wk1 TY 130.5/131 strangles, 45/64

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

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