US TSYS: VIRUS BARK WORSE THAN BITE? RATE CUT SPEC'N OVERDONE

US TSY SUMMARY: Similar to prior session close, rates recede late after making

strong headway off lower lvls late w/ 10YY making new all-time low of 1.2988%

before rebounding to 1.345% late. Heavy futures volume tied to Mar/Jun rolling

should start tapering off ahead Fri's first notice Jun takes lead.

- Headline driven session (again?1?) Rates weaker early: fresh round of selling

on back of headlines that Germany plans to temporarily "suspend debt brake...to

give relief to local governments". General risk-off unwinding weighing prior as

equities attempt bounce after two day rout. Pres Trump conf at 1830ET tonight

- Rates rebound by late morning as statement from German health minister that

Germany is "at the beginning of Corona" virus "epidemic" spurred selling in

eq's, unwinds of risk-on flow from first half, fast- and real$ buying shorts to

intermediates, leveraged$ and bank buying long end. Curves paring back early

steepening, 3M10Y extends inversion. Late virus cases under review in NY

provided another boost before denial from Cuomo.

- US TSYS/5Y: Right on the screws, US Tsy $41B 5Y Note (912828ZC7) awarded

1.150% (1.448% last month) vs. 1.150% WI; 2.33 bid/cover vs. 2.46 prior.

- The 2-Yr yield is down 6.2bps at 1.1627%, 5-Yr is down 2.9bps at 1.1541%,

10-Yr is down 1.7bps at 1.3354%, and 30-Yr is unchanged at 1.8254%

TECHNICALS:

US 10YR FUTURE TECHS: (H0) Bullish Price Sequence Intact 

*RES 4: 134-07+ High Jul 6 2016

*RES 3: 134-03+ 2.0% 10-dma envelope

*RES 2: 133-18+ 1.00 projection of Jan 9 - Feb 3 rally from Feb 6 low

*RES 1: 133-10+  High Feb 25

*PRICE: 132-30+ @ 16:25 GMT, Feb 26

*SUP 1: 131-29   High Feb 3 and former breakout level

*SUP 2: 130-30   Low Feb 19 and 20

*SUP 3: 130-19+ Low Feb 12

*SUP 4: 130-07   Low Jan 29 and key near-term support 

The uptrend in Treasuries remains intact, with a fresh high print Tuesday at

133-10+. Recent gains resulted in a break of the early Feb and 2020 highs of

131-29 putting bulls solidly in control and confirming a resumption of the

uptrend. Resistance at 132-02+ has also been cleared. MA studies are in a bull

mode reinforcing current trend conditions although it is worth noting that the

trend is overbought. Support is at 131-29, scope is for a climb to 133-18+ next.

JGB TECHS: (H0): Impressive Gap Maintained

*RES 3: 154.42 - 1.0% 10-dma envelope

*RES 2: 154.04 - 61.8% Sep - Dec 2019 Decline

*RES 1: 153.69 - High Feb 25

*PRICE: 153.36 @ 16:22 GMT, Feb 26

*SUP 1: 152.39 - 50-dma

*SUP 2: 151.62 - Contract lows, Dec 20

*SUP 3: 151.11 - 76.4% retracement of August 2018 - September 2019 Rally

JGB's solid gap higher Tuesday ripped through all near-term resistance levels to

stage a close  above the 200-dma. This shifts the outlook materially bullish and

upside targets shift to 154.04 and 154.37 above. A close above here would build

a decent base for a challenge on the best levels of 2019. The 200-dma switches

to support at 153.48.

TSY FUTURES CLOSE: Similar to prior session close, rates recede late after

making strong headway off lower levels in second half -- to the point where 10YY

made new all-time low of 1.2988% before rebounding to 1.3371% currently. Yld

curves steeper. Update:

* 3M10Y  +0.717, -17.672 (L: -22.549 / H: -15.29)

* 2Y10Y  +4.907, 17.598 (L: 11.423 / H: 18.192)

* 2Y30Y  +6.211, 66.135 (L: 58.679 / H: 66.754)

* 5Y30Y  +2.511, 66.447 (L: 63.227 / H: 67.26); Current futures levels:

* Mar 2-Yr futures up 1.25/32  at 108-14 (L: 108-10.375 / H: 108-15.88)

* Mar 5-Yr futures up 0.25/32  at 121-3.25 (L: 120-28 / H: 121-09.25)

* Mar 10-Yr futures down 1.5/32  at 133-2.5 (L: 132-22.5 / H: 133-13)

* Mar 30-Yr futures down 6/32  at 167-16 (L: 166-17 / H: 168-09)

* Mar Ultra futures down 25/32  at 200-27 (L: 199-06 / H: 202-08)

US TSY FUTURES: Late Mar/Jun futures roll update. March futures don't expire

until mid-late March (10s, 30s and Ultras on 3/20, 2s & 5s 3/31). Session volume

and % complete update:

* TUH/TUM appr 614,400 from -7.12 to -6.38, -6.88 last; 85% complete

* FVH/FVM appr 1,083,500 from -15.25 to -14.0, -15.0 last; 84% complete

* TYH/TYM appr 997,300 from 3.25 to 4.25, 4.0 last; 84% complete 

* UXYH/UXYM appr 214,600 from 7.5 to 8.5, 7.75 last; 81% complete

* USH/USM appr 299,700 from 31.5 to 1-00.7, 1-00.2 last; 76% complete

* WNH/WNM appr 203,200 from -28.75 to -27.0, -28.75 last; 81% complete

US EURODLR FUTURES CLOSE: Mixed after the bell, Whites outperforming as they

continue to price in increased chances of 1-2 rate cuts by year end; tail lend

of Reds through Golds weaker. Current White pack (Mar'20-Dec'20):

* Mar 20 +0.013 at 98.435

* Jun 20 +0.035 at 98.695

* Sep 20 +0.030 at 98.80

* Dec 20 +0.020 at 98.835

* Red Pack (Mar 21-Dec 21) +0.010 to -0.015

* Green Pack (Mar 22-Dec 22) -0.02 to -0.015

* Blue Pack (Mar 23-Dec 23) -0.025

* Gold Pack (Mar 24-Dec 24) -0.03 to -0.025

US DOLLAR LIBOR: Latest settles

* O/N +0.0025 at 1.5715% (+0.0012/week)

* 1 Month -0.0092 to 1.6034% (-0.0233/wk)

* 3 Month -0.0244 to 1.6132% (-0.0660/wk)

* 6 Month -0.0384 to 1.5902% (-0.0845/wk)

* 1 Year -0.0356 to 1.6101% (-0.1185/wk)

US SWAPS: Spds broadly wider after the bell, little off midday wides with

intermediates to long end outperforming. Couple factors at play -- lack of

swappable supply as virus pandemic angst continues to keep issuers sidelined,

same mkt vol spurring tactical rate paying from fast$ and props, touch of

negative convexity hedging late as 10YY fell to new all-time low of 1.2988%

before rebounding. Latest levels:

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

Wed 1500   +0.31/+4.44    +1.00/+0.75   +1.19/-5.31    +1.38/-37.12

1230       +0.38/+4.50    +1.12/+0.88   +1.31/-5.19    +1.50/-37.00

1000       +0.06/+4.19    +0.88/+0.62   +1.12/-5.38    +1.25/-37.25

Wed Open   +0.12/+4.25    +0.56/+0.31   +0.69/-5.81    +0.25/-38.25

Tue 1500   +0.69/+2.00    +1.12/-0.25   +0.50/-6.50    -1.00/-38.50

Tuesday recap: Spds running mostly wider, off highs, 30Y collapsing late. Spds

pared early gains after surge in swap-tied paying/receiver unwinds around 0900ET

in 2s-10s, flow turning more two-way over last hours, some deal-tied and

pre-auction short sets well ahead the 2Y note auction.

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

* Daily Effective Fed Funds Rate: 1.58%, volume: $64B

* Daily Overnight Bank Funding Rate: 1.58%, volume: $157B

US TSYS: REPO REFERENCE RATES:

* Secured Overnight Financing Rate (SOFR): 1.59%, $1.122T

* Broad General Collateral Rate (BGCR): 1.57%, $451B

* Tri-Party General Collateral Rate (TGCR): 1.57%, $429B

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

27-Feb 0830 22-Feb jobless claims (210k, 212k)

27-Feb 0830 Jan durable goods new orders (2.4%, -1.5%)

27-Feb 0830 Jan durable new orders ex transport (-0.1%, 0.2%)

27-Feb 0830 Q4 GDP (2nd) (2.1%, 2.1%)

27-Feb 0830 Q4 GDP Price Index (1.4%, 1.4%)

27-Feb 1000 Jan NAR pending home sales index (103.2, --)

27-Feb 1030 21-Feb natural gas stocks w/w

27-Feb 1100 Feb Kansas City Fed Mfg Index (-1, -2)

27-Feb 1130 Chi Fed Pres Evans, Global Interdependence Center, Mexico City

27-Feb 1130 US Tsy 4W Bill (912796XD6) auction

27-Feb 1130 US Tsy 8W Bill (9127962D0) auction

27-Feb 1300 US Tsy $32B 7Y Note (912828ZB9) auction

27-Feb 1630 26-Feb Fed weekly securities holdings

PIPELINE: First of week: CPPIB launched earlier; EIB on tap for Thursday

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

02/26 $1B #Canada Pension Plan Investment Board (CPPIB) WNG 5Y +16

02/27 $1B European Investment Bank (EIB) WNG 4Y SOFR+29a

-

No new issuance Monday-Tuesday

Eurodollar/Tsy options 

Eurodollar options:

* +5,000 Sep/Dec 83 straddle strip 41.5 over Sep 86/ Dec 100 call strip

Additional second half flow

* +30,000 Sep 88/91/93 call flys, 3.25

* +20,000 Aug 95 calls, 2.25

* -20,000 short Jun86 puts, 3.0

* -10,000 May 85 puts, 4.0

* -7,000 Dec 88 straddles, 46.0 

* -5,000 Red Mar21 83 puts, 3.5

* Update, over +135,000 Sep 93/95 call spds, 1.5

Block, 1203:27ET, 

scale buyer over +160,000 from 2.5-2.75

* 69,995 Jun 90/92 call spds, 2.75 vs. 98.66/0.10%

* +40,000 (half blocked) Jun 90/92 call spds, 2.5

* +11,500 May 88 calls, 5.5

Block, 1103:37ET,

* 10,000 Green Mar 95/97/100 call flys, 4.0 net

Blocks, 1024-1025ET,

* 25,000 Mar 85/86 call spds, 1.0 w/another 15k in pit

Additional pit trade

* +75,000 Sep 93/95 call spds, 1.5

Block, 1006:08ET, deep in-the-money call block

* 24,372 Red Jun'21 80 calls, 94.5 (OI 80,714 coming into session)

Block, 0839:00ET,

* 20,000 Red Dec'21 96/100 1x2 call spds, 3.0 net

* +10,000 short Jun 81/83 put spds, 0.5 vs. 98.965/0.05%

* -8,000 Sep 95/97/98 2x3x1 call flys, 1.5

Overnight trade recap including Blocks

* Block +30,000 Dec 86/90 1x2 call spds, 0.0

* >50,000 May 92 calls, 1.25

* >13,000 Mar 83/85/86 call flys, 3.0

* 10,500 Jun 92/93/95 call strips, 3.5

* 10,000 Jun 95 calls, 0.75

* 10,000 short Mar 86 puts, 0.5

* 10,000 Mar 80/81/83/85 call condors, 7.75

Tsy options:

* +15,000 TYK 141.5 calls, 2/64

Flurry of screen trade, lifting wing options in 10s and 5s

* +23,000 FVM 115.5 puts, 1/64

* +6,900 FVJ 125.25 calls, 1/64

* +6,400 TYM 125.5 puts, 2/64

* +12,500 TYM 144 calls, 2/64

Block, 0748:38ET,

* 12,500 Jun 157 puts, 24/64 vs. 165-29/0.11%

* -5,000 TYK 135 calls, 21/64

* 1,000 131.7/132.7/133.7 iron flys on 3x1 ratio (3x strangle) 2/64 net

Overnight trade recap including Blocks

* Block 12,000 TYJ 129.5/130 put spds, 1/64

* Block total 12,000 TYJ 132 calls, 1-16 to 1-18

* Block 20,000 TYK 130.5/131.5 2x1 put spds, 2/64

* Block 12,500 USM 157 puts, 24/64 vs. 165-29

* Block 5,000 USJ 156/159/160/162 put condor on 1x4x2x2 ratio, 11/64 net

* 10,000 FVJ 120.75 puts, 10.5

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

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