OI Points To Net Long Setting & Short Cover On SOFR Strip As CPI Outweighed FOMC

The combination of yesterday’s rally in SOFR futures and preliminary OI data points to a mix of net long setting and short cover through the blues.

• The impact of the softer-than-expected CPI data outweighed the reaction to the hawkish adjustments in the Fed’s updated dot plot, with FOMC-dated OIS now fully discounting the first 25bp rate cut through the Nov FOMC.
• FOMC-dated OIS also shows ~41bp of cuts through year end vs. post-CPI extremes of ~49bp and~36bp late on Tuesday.
• The whites and reds saw short cover dominate in net pack OI terms, with meaningful net short cover seemingly apparent in SFRU4 and SFRU5. Some pockets of net long setting were also seen in those packs, most meaningfully in SFRH5.
• Meanwhile, the greens and blues saw (more modest) rounds of net long setting in pack OI terms, with the most meaningful round of net long setting coming in SFRH6. Pockets of net short cover also showed up, most notably in SFRU6.