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Eurodollar/SOFR/Tsy Option Roundup

US TSYS
FI option volume picked up Wednesday as desks re-staffed following the extended holiday weekend. Better put trade mixed amid some decent strike roll-downs as underlying futures continued to sell off amid hawkish Fed speak and stronger than expected data.
  • While hawkish BOC annc may have been a factor, data more likely trigger for sell-off: Much stronger than expected May ISM Manufacturing Index of 56.1 vs. 54.5 exp while the Prices Paid component is 82.2 vs. 80.5; April reading of Construction Spending is +0.2 vs. +0.5% exp.
  • Meanwhile, The Federal Reserve should raise interest rates fairly rapidly to perhaps a little bit above neutral to control inflation that's now comparable to the 1970s, St. Louis Fed President James Bullard said Wednesday.
  • Hedging for hikes to bleed into mid-2023, 20,000 Red Jun'23 SOFR 95.75/95.87 put spds at bought/blocked 2.5 vs. 96.905/0.10%. Conditional bear curve steepener in Eurodollar options had paper buying 10,000 Blue Sep 96.87/97.12 put spds 2.5 over Sep 97.12/97.37 put spds.
  • Some decent call flow included a sale of 8,500 Dec 97.00/97.50/98.50/99.00 call condors, 14.5 vs. 96.905/0.20% and pre-open block of 19,750 short Aug 97.37/97.62 call spds 3.0, 10k vs. 96.795/0.08%.
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