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Eurodollar/Tsy Option Roundup, Hedging Multiple 50Bp Hikes

US TSYS
Rate hike insurance/put buying gained momentum Thursday as rates sold off consistently through the session, yield curves bear flattening after a brief steepening period in the first half as bonds extending session lows (30YY taps 2.9845% high). Impressive moves had rates back to middle of the week's range. Curve flattening resumed as inflation expectations climbed.
  • Put buying strong with short end prices in more hikes. Fed Chairman Powell comments, while hawkish, weren't exceedingly so as he intimated 50bp is on the table for May 4 FOMC. Markets pricing in two additional 50 bps through June and July meetings.
  • One-two punch with StL Fed Bullard weighing in on hikes: the "world would not come to an end" if Fed anncd a 75bp hike. That said, Bullard expressed sentiment the "bond market is not looking like a safe place to be" while the Fed "should avoid disruptions from surprise market moves."
  • Salient trade included buy of 10,000 Sep Eurodollar 96.50/96.75/97.00 put flys w/ Dec 96.12/96.37/96.62 put flys, 6.5 total on the package. In SOFR options, paper bought 15,000 SFRU2 97.06/97.43/97.81 put flys 2.25 over 98.37 calls. Treasury option volume was more muted, but paper bought 4,200 USM 132/134/136/138 put condors and 10,000 TYM 115.5/117.5 3x2 put spds, 38 ref 118-29.5.
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