US 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$]