OI Points To Mix Of Short Setting & Long Cover On SOFR Futures Strip On Friday

The mix of the general weakness in SOFR futures on Friday and preliminary OI data points to the following positioning swings ahead of the weekend:

• Whites: Long cover seemed to be the dominant positioning move in net pack terms, although apparent rounds of net short setting were seemingly seen as well.
• Reds through Blues: Net short setting seemed to dominate all packs, although some modest rounds of apparent net long cover also showed up.
• Firmer-than-expected PPI data accelerated the pre-NY sell off, although there was a pullback from.
• The pricing of Fed cuts moderated post-PPI, although SOFR futures finished comfortably off of session extremes as the totality of the data was assessed and some technical boundaries in Tsys held.
• Early ’24 extremes re: shallowest levels of cuts through Dec ’24 were breached (~78bp of cuts over that horizon showed at one point), but the market didn't want to price less than 3x 25bp cuts.
• Comments from San Francisco Fed President Daly had little impact, as she generally echoed recent Fedspeak.