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Eurodollar/Tsy Option Roundup

US
Much less put-centric like the week opener, Tuesday's flow more mixed with some upside/low delta call buying picking up in the second half.
  • Both Eurodollar and Treasury futures trade well off midmorning lows to near late overnight highs in late NY trade -- before Wed's Dec CPI.
  • First half trade was more carry-over bear-bias trade in-line with Fed speakers (Bostic, Mester and George) and dealers calling for 3-4 rate hikes in 2022 (JPM and GS see 4), first hike in March, faster balance sheet drawdown, quantitative tightening later in second half of 2022.
  • On/Off inversion: Eurodlr Greens (Mar'24-Dec'24) are current inflection point where current tighter policy opinions falter, differing opinions on if/when hikes stop, chances of easing or resumption of accommodation priced back in.
  • Rates rebounded late morning with less aggressive tone from Fed Chair Powell at his Senate nomination hearing that ran through noon.
  • Huge 2Y Block: +20,570 TUH2 108-23.75, buy through 108-23.37 post-time offer at 1313:37ET. Print comes on heels of debate over short end reaction to a "hot" CPI figure tomorrow, (0.4% est vs. 0.8% previous).
  • Given heavy short end selling last week as market aggressively prices in first rate hike in March, another above consensus read for the inflation figure unlikely to induce further selling in the short end (re: .50bp hike in March).
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