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Late SOFR/Treasury Options Remain Mixed, Projected Cut Pricing Steady

US TSYS

SOFR and Tsy option flow remained mixed on net late Wednesday, with pick up in Mar/Jun SOFR call spreads crossed in the second half. Projected rate cut pricing receded from morning lvls: March 2024 chance of 25bp rate cut currently -21.2% vs. -20.3% earlier w/ cumulative of -5.3bp at 5.271%, May 2024 at -61.3% vs. -61.2% w/ cumulative -20.6bp at 5.117%, while June 2024 -89.9% vs. -90% (105% pre-NFP for comparison) w/ cumulative -43.1bp at 4.893%. Fed terminal at 5.3225% in Feb'24. Highlight trade in the second half:

  • SOFR Options:
  • Block, 5,000 0QH2 95.68/2QH4 96.12 put spds 0.0
  • Block, 8,000 SFRH4 94.81/94.87 call spds, 1.25 ref 94.80
  • Block, 7,500 SFRH4 95.06/95.12 call spds, .5 ref 94.805
  • Block, 6,000 SFRM4 96.00/96.18 call spds (0.5) vs. 95.25/95.43 put spds (14.0) vs. 95.14
  • 8,000 SFRM4 96.25/96.50 call spds, ref 95.165
  • -2,500 SFRJ4 95.00/95.12 put spds, 6.0 vs. 95.16/0.14%
  • Block, 10,000 SFRM4 95.12/95.25 call spds .75 over 94.81/94.93 put spds ref 95.165
  • Treasury Options:
  • 2,500 TYH4 112.5/113.75 1x2 call spds, 3 ref 111-05.5
  • -10,000 TYJ4 110.5/113.5 strangles, 61
  • 1,600 USJ4 117/118 put spds, 27 ref 120-28
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