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Early SOFR/Treasury Option Roundup: Rate Cut Repositioning

US TSYS

Mixed SOFR and Treasury option trade overnight. Option accounts trying to reposition/regroup after projected rate hikes through mid-2024 have moderated following stronger data and (modest) push-back from Fed speakers this week. January 2024 cumulative -0.6bp at 5.323%, March 2024 chance of rate cut -52.4% vs. -58.2% late Thursday w/ cumulative of -13.7bp at 5.192%, May at 86.4% vs. -88.6% late Thursday w/ cumulative -35.3bp at 4.956%. June 2024 pricing in the first 25bp cut with cumulative -60.9bp at 4.720%. Fed terminal at 5.325% in Feb'24.

  • SOFR Options:
    • 4,000 SFRM4 95.50/95.75 call spds vs. SFRM4 94.87/95.06 put spds ref 95.33
    • 6,000 SFRK4 95.50/95.75/95.87 broken call flys vs. SFRK4 94.87/95.00 put spds ref 95.33
    • 3,000 3QJ4 97.50/97.62 call spds ref 96.44
  • Treasury Options:
    • 5,000 TYH4 108/109 put spds ref 111-08
    • 3,900 TYH4 112.5 calls, 24 last
    • 3,600 TYG4 112 calls, 7 last
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