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Near-Term Hike Positioning, Long-Term Cuts

STIR
  • In the lead-up to Chairman Powell's semi-annual policy testimony to Congress, the latest option trade includes better downside put positioning for two 25bp hikes by year end (put condor roll-down and Sep put fly with underlying SFRU3 trading 94.64.
    • -15,000 SFRZ3 94.50/94.75/95.00/95.25 put condors vs. 94.12/94.37/94.62/94.87 put condors
    • +10,000 SFRU3 94.25/94.37/94.50 put flys, 2.25
    • +2,000 SFRZ3 94.50/94.62/94.75 put flys
  • On the flipside, paper positioning for rate cuts in 2025 with long duration Green Mar'25, Sep'25 and Dec'25 upside call buying.
    • -5,000 SFRH5 96.00/97.00 put over risk reversals 0.0 vs. 96.495/0.72%
    • +15,000 SFRU5 97.50 calls, 45.0 ref 96.645
    • +10,000 SFRZ5 97.50 calls, 48.0 ref 96.70

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