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Late SOFR/Treasury Option Summary

US TSYS

SOFR and Tsy option trade remained mixed Friday, segueing to more paired in the second half from better puts overnight into the NY session. Underlying futures held weaker, near early session lows: TYH4 at 110-18 (-6), a level not seen since prior to the December 13 FOMC, 10Y yield marking 4.1929% high.

  • Projected rate cut pricing drifted near lows: March 2024 chance of 25bp rate cut currently -19.3% vs. -21.2% late Thursday w/ cumulative of -4.8bp at 5.278%, May 2024 at -54.0% w/ cumulative -18.3bp at 5.143%, while June 2024 slips to -81.3% vs. -89.3% late Thursday (105% pre-NFP for comparison) w/ cumulative -38.6bp at 4.940%. Fed terminal at 5.325% in Feb'24. Salient second half trade:
  • SOFR Options:
    • +5,000 SFRM4 94.93/95.12/95.31 put flys, 2.75 ref 95.12
    • +5,000 SFRZ4 95.50/96.12/96.37/97.00 call condors, 13.0
    • +1,500 SFRZ4 98.00/99.00 call spds, 3.5
    • Block, 5,000 0QH4 97.00/97.12 call spds, 0.5
    • Block, +5,000 SFRZ4 94.75 puts vs. SFRZ5 94.00/94.75 put spd, 2.5 Z5 over
    • Block, 5,000 SFRM4 95.25/95.50/95.75 call flys, 2.0 ref 95.14
    • Block, 6,000 SFRU4 95.75/96.25/96.87 broken call flys, 3.0 net vs. 95.53/0.05%
    • -15,000 SFRH4 94.93/95.00 call spds, 0.5 ref 94.775
  • Treasury Options:
    • +5,000 FVH4 108.25 calls, 5 ref 107-04 to -04.25
    • 2,000 ush4 116/118 PUT SPDS, 26 REF 119-24
    • 2,000 TYH4 109/110 put spds, 12 ref 94.77
    • over 7,400 TYH4 110 puts, 18 last
    • over 5,800 TYH3 109 puts, 4 last
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