OI Points To Modest Net Short Cover Across Much Of SOFR Strip On Monday

The combination of Monday’s rally in SOFR futures and preliminary OI data points to a mix of net short cover and long setting through the blues, with the former dominating in net pack OI terms.

• Still, net OI swings were relatively contained in both individual contract and pack terms.
• A reminder that softer-than-expected ISM manufacturing and construction spending data allowed an early rally to extend, with the details of the ISM survey promoting deeper/further stagflation-lite commentary.
• SOFR futures moved further away from '24 lows as a result.
• Note that the data resulted in a fairly sharp adjustment lower for the Atlanta Fed’s GDPNow tracker, although the Q2 estimate provided by that reading still sits closer to 2% than 1% (falling from 2.7% to 1.8%).
• Recent Fedspeak and the trend in early ’24 inflation data keeps FOMC-dated OIS titled towards the hawkish depths of year-to-date pricing, but Monday’s move allows the first 25bp cut to be fully discounted come the end of the Nov FOMC, with ~42bp of cuts then showing through year end (vs. ~36bp late Friday).