US TSYS: WHERE'D THE OFFER GO? LATE TSY BOUNCE, STRONG 10Y R/O

US TSYS SUMMARY: Where'd the offer go? Tsys recover late, more a function of

evaporating offers than heavy buy interest though latter at play covering shorts

and taking profits on tactical steepeners set earlier in week. Curves finish

flatter after trading broadly steeper in first half:2s10s -0.921, 57.158

(62.336H/57.117L), 5s30s -0.127, 56.152 (59.513H/55.775L). - Futures had quietly

drifted to top end intra-day range heading into $20B 10Y note re-open, traded

higher after strong/stopped through w/2.579% rate (highest since mid-2014),

strong bid/cover of 2.69.

- Little react to Chicago Fed Evans, Dallas Fed Kaplan comments, Tsys held

lower/narrow channel after sharp sell-off during London hours on headline that

China may slow/halt Tsy buying. US$ slammed, equities knocked lower but

rebounded (emini -4.25, 2748.0), gold firmer/off highs (XAU +5.54 1118.32), oil

stronger (WTI +0.45, 63.41).

- Flow includes real$ selling old 3Y to buy new, fast$ selling old 10Y to buy

new, heavy deal-tied flow/hedge unwinds late.

- Late ylds: 2Y 1.968%, 3Y 2.081%, 5Y 2.321%, 7Y 2.461%, 10Y 2.546%, 30Y 2.889%

US TSY FUTURES CLOSE: Tsys continue to recover, trade steady/mixed on screen

after the bell. Heavy volume (TYH>1.96M), 10Y yld 2.544%. Latest curve update:

* 2s10s -0.921, 57.158 (62.336H/57.117L);

* 2s30s -0.971, 91.323 (97.359H/91.243L);

* 5s30s -0.127, 56.152 (59.513H/55.775L); Current futures levels:

* Mar Ultra bonds down 1/64 at 163-15 (161-26L/163-16H)

* Mar 30-yr Bond futures down 3/32 at 150-04 (149-03L/150-06H)

* Mar 10-yr futures steady at 123-01.5 (122-22.5L/123-03H)

* Mar 5-yr futures up 0.25/32 at 115-20.75 (115-15.5L/115-21H)

* Mar 2-yr futures down .25/32 at 106-29 (106-28L/105-29.5H)

US EURODOLLAR FUTURES CLOSE: Late session rebound, long end of strip finishing

higher, well off first half lows. Current White pack (Mar'18-Dec'18):

* Mar'18 -0.005 at 98.185

* Jun'18 +0.000 at 98.000

* Sep'18 +0.000 at 97.880

* Dec'18 -0.005 at 97.765

* Red pack (Mar'19-Dec'19) -0.010-0.005

* Green pack (Mar'20-Dec'20) steady

* Blue pack (Mar'21-Dec'21) steady to +0.005

* Gold pack (Mar'22-Dec'22) steady to +0.005

US SWAPS: Off early mixed levels, spds running tighter across the board, spd

curve holding flatter even as Tsy curve rebounds late. Spd narrowing on back of

decent supra-sovereign supply today ($6.5B Sultanate of Oman (OMAN) 5s/10s/30s,

IADB priced $3.75B 5Y, total $2B State of Israel w/$1B each 10- and 30Y).

Earlier, sources reported macro fund receiving in 10s, payers in 2s at 2.169%

and 5s at 2.40875%., carry-over macro fund receiving in 10s and 30s. OTC and

exchange traded option vol reversed gains late as underlying moved off lows.

Latest spread levels:

* 2Y  -0.25/19.38

* 5Y  -0.19/4.12

* 10Y -0.56/-1.69

* 30Y -1.00/-21.25

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

- Jan 11 06-Jan jobless claims (250K, 245K) 0830ET

- Jan 11 Dec Final Demand PPI (0.4%, 0.2%) 0830ET

- Jan 11 Dec PPI ex. food and energy (0.3%, 0.2%) 0830ET

- Jan 11 Dec PPI ex. food, energy, trade (0.4%, --) 0830ET

- Jan 11 07-Jan Bloomberg comfort index 0945ET

- Jan 11 05-Jan natural gas stocks w/w (-206Bcf, --) 1030ET

- Jan 11 US Tsy $12.0B 30Y bond roepening auction 1300ET

- Jan 11 Dec Treasury budget balance (-138.5B, -$37.5B) 1400ET

- Jan 11 NY Fed Pres. Dudley on '18 US Eco Outlk; SIFMA NY Q/A 1530ET

- Jan 11 10-Jan Fed wkly securities holdings USD 1630ET

Eurodollar/Treasury Option Summary

Eurodollar options, Pit/screen:

* +25,000 Mar 81 puts, 1.25-1.5

* Update, total +15,000 Mar 82/83 1x2 call spds, 1.25

* +10,000 long Green Mar 68/72 2x1 put spds, 1.5

* +3,000 Green Jun 75 puts, 15.5 vs. 97.51/100%

* -12,000 short Jun 77/82 5x2 put spds, 24.0 vs. 13,600 EDM9 97.62

Block, 1026:14ET,

* 10,000 short Mar 75/76 put spds, 3.5 vs.

* 10,000 short Mar 78 calls, 2.0 vs. 97.66/0.10%

* -15,000 Jun 82 straddles vs. the short Jun 78/86 strangles, 39.0 net --

appears to be an unwind (partial) after prop shop bought straddle in good size

vs. the strangle around 39.25-39.5 back in early September

Block, 1007:51ET,

* 20,000 Dec 87 calls, 2.0

* 15,000 short Dec 82 calls, 2.5

* +50-60,000 Jun 76/77/78 put flys, 1.25, +40k since last wk from 1-1.25

* 5,000 Blue Jun 76/78 2x1 put spds, 1.5

* 2,500 Feb/Mar 81 put spds, 0.75

* +10,000 long Green Mar 68/72 2x1 put spds, 1.5

* another 5,000 short Apr 75/76 1.5x1 put spds vs. short Apr 78 calls, 0.25

net/put spd over -- pit trade adding to 41k Blocked earlier

* 3,000 short Mar 77 straddles, 16.5

* 3,000 short Jun 76 straddles, 25.5

* 3,000 Jun 76/77/78 put flys, 1.25

* 7,500 Blue Mar 71 puts and 77 calls on screen right after pit open

Block, 0754:08ET -- repeating earlier, 41k total

* 5,000 short Apr 75/76 1.5x1 put spds vs. short Apr 78 calls, 0.25 net/put spd

over

* +20,000 short Apr 73 puts, 2.0 adding to decent short Apr Blocks

* 65,000 Green Mar 73 puts, 3.5

* 5,000 Apr 81/82/83 put flys

Tsy options, Pit/screen:

* +13,000 TYH 126 calls, 2/64

* -3,200 TYH 123/124.5 3x2 put spds, 1-28

* -5,500 TYH 123 puts, 47/64

* 2,500 TYH 123.5/124.5 1x2 call spds, 7/64 vs. 122-29

* -1,000 TYJ 122.5 straddles, 1-43/64

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

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