Post-LIBOR Settle Update: New 3M High

Lead quarterly EDM2 trades firmer at 98.115 (+0.04), near the middle of wide overnight range as it dips slightly after latest 3M LIBOR set' climbs to new 2-year high of 1.22486% (+0.01115), adding to last week's total gain of +0.12129.

• Comfortable with pricing of three consecutive 50bp hikes while rebuffing chance of 75bp move(s) following Cleveland Fed Mester comments late Friday: balance of Whites (EDU2-EDH3) trade +0.050-0.120 higher, while Reds (EDM3-EDH4) gain +0.135-0.120, Greens-Golds (EDM4-EDH7) up +0.115-0.050.
• Start of price inversion holding in front Reds: Red Sep (EDU3) currently trading 96.570 vs. Red Jun (EDM3) at 96.50 -- low measure of confidence in forward policy and/or Fed managing a soft landing/avoiding recession has been priced in for months. Levels start to flatten out (dis-invert) around late Blue Mar'26/Gold Jun-26 trading around 97.085.
• Friday derivatives roundup: Gyrations in underlying FI futures Friday spurred buyers of wing insurance (low delta calls and puts), challenging environment for active traders. Bonds see-sawed around steady before rallying around midmorning, curves flattening with short end rates underperforming all session.
• Bonds trimmed gains by noon, holding to a narrow range while the short end pared losses after Cleveland Fed President Mester pushed back on any need to hike 75 bp at the May 4 FOMC in an interview on CNBC after the close. Note, lead quarterly Eurodollar futures EDM2 traded 98.11 (-0.065) after the bell vs. 98.050 session low.