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Eurodlr/Tsy Futures/Options Roundup: Short End Hammered Post FOMC

US
Markets reacted bearishly to the FOMC holding rates steady:
  • Short end yields surged on heavy volumes (2YY 1.1424%; 5YY 1.6713%) while equities gave up strong gains to trade weaker as Chairman Powell conceded liftoff will "soon be appropriate" as economic activity continues to expand at a robust pace and ""inflation remains well above our longer run goal of 2%."
  • Stocks initially held gains until balance sheet run-off was discussed, lacking details over "sooner, faster" asset reductions appeared to trigger a sell-off.
  • Short to intermediate rates sold off sharply as prospect for more than just 25bp rate hikes past March gained traction: lead quarterly Mar'22 Eurodollar futures slipped to 99.515 (-0.040) while June fell to 99.14 low (-0.090). Red pack (EDH3-EDZ3) traded -0.140-0.160 by the close -- Red March 2023 pricing in 125-150bp in hikes.
  • Option trade saw some profit taking: over 20,000 TYH 127 puts sold from 30-26 (total session volume over 110k) after heavy buying over the last week; paper sold 10,000 Apr/Jun 98.93/99.06 put spd strip, 3.25, unwinding tactical play after paying 1.75 total to buy the double spd last wk.
  • Otherwise, active accts continued to add to downside/rate hike positioning: for example paper +10,000 May 98.87/99.06/99.18 put flys, 2.75 adds to +50k Tue from 2.25-2.75.
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