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Free AccessUS 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$]
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MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.