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Free AccessUS TSYS:VIRUS DEFENSE "MORE THAN ADEQUATE"/MKT THINK OTHERWISE
US TSY SUMMARY: Familiar theme, rates recede late after making strong headway
off lower levels in second half, 10YY new all-time low 1.2408% rebounding to
1.3004%, 30YY new low of 1.7408%, 1.7930% after the bell. Obviously mkts remain
headline sensitive, rates quick to react then settle in w/little follow through.
- Option accts continue to be better buyers upside calls hedging for as many as
three rate cuts by year end (Mar 18 chances of cut appr 64%, while Apr 29 fully
pricing in a 25bps cut w/chances of a 50bps cut on the rise (34.5%). A second
cut just now fully priced in for the Jun 10 meeting with a third cut around the
Nov to Dec meetings. Heavy call option buying underscores/anticipated the moves.
- Prior to late risk-off bid in rates by wide range of accts (Bbg headline:
"CALIFORNIA MONITORING 8400 PEOPLE" for virus rekindled bid), sources reported
real$ selling 2s and buying 10s, fast$ selling flys in the intermediates, real$
buying 7s and 10s, no deal-tied hedging but there were some auction hedge
unwinds/buying earlier. Prop acct selling strength in intermediates as levels
recede slightly off latest move. $32B 7Y Note auction tailed: awarded 1.247%
(1.570% last month) vs. 1.232% WI.
- The 2-Yr yield is down 7.4bps at 1.0912%, 5-Yr is down 6.1bps at 1.0976%,
10-Yr is down 4.8bps at 1.2888%, and 30-Yr is down 3.9bps at 1.7852%.
TSY FUTURES CLOSE: Again -- similar to prior couple sessions, rates recede late
after making strong headway off lower levels in second half, 10YY made new
all-time low of 1.2408% before rebounding to 1.3004% currently, 30YY fell to new
low of 1.7408%, 1.7930% after the bell. Yld curves steeper. Update:
* 3M10Y +2.757, -15.337 (L: -23.862 / H: -13.613)
* 2Y10Y +2.196, 19.031 (L: 16.817 / H: 20.908)
* 2Y30Y +2.858, 68.396 (L: 65.416 / H: 70.808)
* 5Y30Y +2.061, 68.183 (L: 66.446 / H: 70.033); Current futures levels:
* Mar 2-Yr futures up 2.125/32 at 108-17.5 (L: 108-13.75 / H: 108-22.12)
* Mar 5-Yr futures up 3/32 at 121-10.5 (L: 121-01.75 / H: 121-21.25)
* Mar 10-Yr futures up 3.5/32 at 133-14 (L: 133-00.5 / H: 133-31)
* Mar 30-Yr futures up 10/32 at 168-13 (L: 167-13 / H: 169-18)
* Mar Ultra futures up 4/32 at 202-0 (L: 200-18 / H: 204-00)
US TSY FUTURES: Final Mar/Jun futures update before June takes lead quarterly
Friday. 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 309,900 from -7.38 to -6.75, -7.0 last; >95% complete
* FVH/FVM appr 456,600 from -15.25 to -14.25, -15.0 last; >95% complete
* TYH/TYM appr 527,800 from 3.0 to 4.25, 3.25 last; >95% complete
* UXYH/UXYM appr 78,700 from 8.0 to 9.0, 8.75 last; >95% complete
* USH/USM appr 218,300 from 1-0.25 to 1-02, 1-00.7 last; >95% complete
* WNH/WNM appr 107,900 from -29.25 to -27.25, -28.5 last; >95% complete
US EURODLR FUTURES CLOSE: Mixed after the bell, Whites outperforming as they
continue to price in increased chances of 3 rate cuts by year end; Blues through
Golds weaker. Current White pack (Mar'20-Dec'20):
* Mar 20 +0.040 at 98.485
* Jun 20 +0.035 at 98.750
* Sep 20 +0.040 at 98.860
* Dec 20 +0.035 at 98.890
* Red Pack (Mar 21-Dec 21) +0.020 to +0.035
* Green Pack (Mar 22-Dec 22) steady to +0.010
* Blue Pack (Mar 23-Dec 23) -0.01 to steady
* Gold Pack (Mar 24-Dec 24) -0.015 to -0.01
US DOLLAR LIBOR: Latest settles
* O/N +0.0025 at 1.5740% (+0.0037/week)
* 1 Month -0.0223 to 1.5811% (-0.0456/wk)
* 3 Month -0.0328 to 1.5804% (-0.0988/wk)
* 6 Month -0.0570 to 1.5332% (-0.1415/wk)
* 1 Year -0.0729 to 1.5372% (-0.1914/wk)
US SWAPS: Spds running marginally mixed, short end resisting move, narrow range
with little in way of deal-tied hedging, brief convexity related buying out the
curve when made new all-time lows (1.7408%). Latest levels:
Time(ET) 2Y Swap/Mid 5Y Swap/Mid 10Y Swap/Mid 30Y Swap/Mid
Thu 1500 +0.06/+4.31 -0.19/+1.62 -0.25/-5.38 -0.19/-37.31
Thu Open -0.25/+4.00 -0.12/+1.75 -0.12/-5.25 -0.19/-37.31
Thu 0715 -0.50/+3.75 -0.12/+1.75 -0.12/-5.25 -0.12/-37.25
Wed 1500 +0.31/+4.44 +1.00/+0.75 +1.19/-5.31 +1.38/-37.12
Wednesday recap: 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.
STIR: Federal Reserve Bank of New York EFFR for prior session:
* Daily Effective Fed Funds Rate: 1.58%, volume: $62B
* Daily Overnight Bank Funding Rate: 1.58%, volume: $155B
US TSYS: REPO REFERENCE RATES:
* Secured Overnight Financing Rate (SOFR): 1.58%, $1.120T
* Broad General Collateral Rate (BGCR): 1.57%, $458B
* Tri-Party General Collateral Rate (TGCR): 1.57%, $433B
OUTLOOK: *** US Data/speaker calendar (prior, estimate):
28-Feb 0830 Jan personal income (0.2%, 0.4%)
28-Feb 0830 Jan current dollar PCE (0.3%, 0.3%)
28-Feb 0830 Jan total PCE price index (0.3%, 0.2%)
28-Feb 0830 Jan core PCE price index (0.2%, 0.2%)
28-Feb 0830 Jan advance goods trade gap (-$68.3B, -$68.5B)
28-Feb 0830 Jan advance wholesale inventories (-0.2%, 0.1%)
28-Feb 0830 Jan advance retail inventories (0.0, 0.2%)
28-Feb 0915 StL Fed Pres Bullard, economy/mon-pol outlook
28-Feb 0945 Feb MNI Chicago PMI (42.9, 46.0)
28-Feb 1000 Feb Michigan sentiment index (f) (100.9, 100.7)
28-Feb 1100 Q1 St. Louis Fed Real GDP Nowcast
28-Feb 1115 Q1 NY Fed GDP Nowcast (1.32%, --)
PIPELINE: EIB priced recently
Date $MM Issuer/Rating/Desc/Maturity/Yld; Priced *; Launch #
02/27 $1B *European Investment Bank (EIB) WNG 4Y SOFR+28
02/?? $Benchmark Belarus 15Y (in addition to EUR 6- or 8Y)
-
$1B priced Wednesday
02/26 $1B *Canada Pension Plan Investment Board (CPPIB) WNG 5Y +16
Eurodollar/Tsy options
Eurodollar options:
* 20,000 Dec 81/83 put spds, 2.5
* -35,000 May 82/83 put spds, cab
* -15,000 Jun 86/87 call spds, 16.5
* -30,000 Mar 87/90 call spds, 0.5
* Update, +80,000 Mar 85/86/87 4x5x4 call flys, 12.0
Block, 1247:47ET, put skew rebounds slightly
* +40,000 short Jun 83 puts, 1.0 vs. 98.95/0.05%
* 17,500 Mar 85/86/87/88 call condors, 2.5
* Update, +100,000 Jul 96 calls, 1.5
* +30,000 Jul 96 calls, 1.5
Recent Block (1205:08ET)
* 55,000 Jun 82 puts, 0.5 vs. 98.745
Block, 1159:13ET, adding to prior 15k block
* another 24,500 Aug 95/97 call spds, 2.25 vs. 98.87
* 25,000 Jun 86/87 call spds 4.0 over the Jun 85 puts vs. 98.795/0.32%
* 10,000 short Mar 91/short Apr 92 call spds, 1.0
Block, 1128:51ET
* 15,000 Aug 95/97 call spds, 2.25 vs. 98.87/0.08%
* 20,000 Apr 91/92/93 call flys, 3.25
* 26,000 Jun 85/87 call spd vs. short Jun 87/90 call spd, 0.0 net
* 26,000 Apr 83/87 call spds vs. short Apr 86/90 call spds, 0.5 net, midcurve
over
* +10,000 each Mar 91 and 92 calls at cab
* Update, +10,000 Sep/Jun 87 straddle spds, 10.0 net/Sep over
* +30,000 short Jun 95/97 call spds, 3.5
* Update, total +250,000 Jun 97/100 call spds, 0.5
* another +75,000 Jun 97/100 call spds, 0.5 in pit -- add to +150k block
* +10,000 Jun 87/90 call spds 8.5
* +25,000 short Jun 91/93 1x2 call spds, 0.0
Block, 0957-1001ET (*incidentally -- had been buyers of this spd late 2019 at
cab)
* +150,000 Jun 97/100 call spds, 0.5
* 22,500 Aug/Sep 82/83 put spd spd, 0.0
* 5,000 short Jun 91/93 2x3 call spds, 9.0
* Update, total +120,000 Apr 88/90 call spds vs. -30,000 Jun 92 calls, 9.5 net
Blocks, 0924:41ET
* +5,000 Apr 87/88 4x5 call spds vs. 20,000 Apr 86 puts, even net
* 30,000 Mar 87/90 call spds 0.5
* -15,000 Jun 86/87 call spds, 6.5
* 10,000 short Jun 87/90 call spds, 21.0
* 80,000 Apr 88/90 call spds, 3.0 vs. 20,000 Jun 92 calls 2.5
* -25,000 Sep 87/92/97 call flys, 11.5
* +30,000 Apr 88/90 call spds vs. 7,500 Jun 92 calls, 9.5 net
* 10,000 Mar 83/85 1x2 call spds, 1.75
* appr 20,000 Blue Apr 90/92 1x2 call spds, 3.0
* 6,100 Mar 85/86/87 4/5/4 call flys, 12.0 net
Ongoing flood Block posts, latest
* 5,000 Red Mar'21 96/98 2x3 call spds, 4.5 at 0751:35ET
* 2,500 Jun 85/87 4x5 call spds vs. 15,000 Jun 85 puts, 22.0 net vs. 98.74 at
0644:51ET, adds to prior 6,000
Blocks, 0723-0724ET
* +39,000 Jun 86/87 call spds, 6.0 vs. 98.74/0.15% after recent buy Jun 86/88
call spds
Latest Blocks,
* another 24,750 Apr 86/87 call spds 2.5 over Apr 86 puts vs. 98.75/0.50% at
0720:08ET -- adds to prior 50,000 Apr 86/87 call spds 1.75 (corrected price)
over the Apr 86 puts vs. 98.74/0.50% at 0508-0613ET
* 10,000 Jun 86/88 call spds, 10.5 at 0716:29ET
Block, 0709-0710ET
* total 10,000 Red Mar 90/95 call spds, 17.5
Block, 0643:14ET
* +25,000 Jun 82 puts, 0.5 vs. 98.725/0.05%
Overnight Block recap
* total 50,000 Apr 86/87 call spds 10.75 over the Apr 86 puts vs. 98.74/0.50% at
0508-0613ET
* +6,000 Jun 85/87 4x5 call spds vs. 36,000 Jun 85 puts, 22.0 net vs. 98.74 at
0601ET
* +100,000 Apr 88/90 call spds 2.75 vs. 98.735/0.12% Late Wed to 0341ET
* -20,000 Red Mar 86/90 1x2 call spds, 6.0
Tsy options:
* 3,000 TYM 128/130/132 call flys, 22/64
* 3,000 TYJ 131/131.75 2x1 put spds, 1/64
* 2,250 TYJ 132.5/133.5/134.5/136 broken call condors, 17/64
* 1,500 TYJ 132.75/TYM 130.5 straddle spds, 1-50/64
* over 2,000 TYM 133.5 straddles traded 2-36 to 2-38/64
Little earlier
* +20,000 FVM 123.5/124 call spds, 5/64
--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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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.