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Late SOFR/Treasury Option Roundup

US TSYS

SOFR options continue to revolve around call structure/rate cut positioning well after this morning's lower than expected PPI inflation measures for December. Data spurred a strong rally in short to intermediate FI markets while projected rate cuts for the first half of 2024 rebounded: January 2024 cumulative -1.6bp at 5.313%, March 2024 chance of rate cut -77% w/ cumulative of -20.9bp at 5.120%, May 2024 fully pricing in 25bp cut now, cumulative -50.1bp at 4.828%. June 2024 cumulative -80.4bp at 4.525%. Fed terminal at 5.3275% in Jan'24.

  • Sampling of second half SOFR Options:
  • +5,000 SFRZ4 96.50/97.00/97.50 call flys, 6.0 vs. 96.35/0.05%
  • +30,000 SFRG4 95.12/95.25/95.37 call flys, 1.0
  • +50,000 SFRH4 95.25/95.37/95.43/95.56 call condors, 0.75
  • Block, 8,880 SFRZ4 94.12/94.62/95.00 put flys, 1.5 net ref 96.32
  • Block, +11,000 SFRU4 96.00/96.50 call spds vs. -0QU4 97.00/97.50 call spds, .75 cr conditional steepener: midcurve sold over
  • Block, 10,000 SFRZ4 97.75/98.00 call spds 2.5 vs. 96.28/0.05%

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