Post-LIBOR Update: New High as Settle Resumes

Lead quarterly EDM2 trading marginally weaker at 98.085 (-0.005) after latest 3M LIBOR set' climbs to new 2-year high of 1.36329% (+0.02843).

• The balance of Whites through Reds (EDU2-EDH4) trade -0.010-0.020 lower, Greens through Golds (EDM4-EDH7) trade +0.005-0.055 higher, Golds outperform.
• Inversion holding in front Reds: Red Sep (EDU3) currently trading 96.405 vs. Red Jun (EDM3) at 96.32 -- low measure of confidence in forward policy and/or Fed managing a soft landing/avoiding recession has been priced in for months. Levels start to flatten out (dis-invert) around late Blue Mar'26/Gold Jun'26 trading around 96.91.
• Monday derivatives roundup: FI options trade turned mixed Monday, two-way positioning in calls and puts, outright and on spread as underlying FI futures traded broadly weaker (except for bid in Jun'22 and Sep'22 Eurodollar futures).
• London and Asia extended spring holiday weekend exacerbated thin markets w/ sidelined accts ahead Wed's FOMC policy annc. Yield curves at/near session highs as bonds lead sell-off, 10YY breach of 3.0% to 3.0003% highest level since Dec 2018, albeit amid modest overall volumes (TYM2 <875k).
• Salient Eurodollar option trade included put skew buying: 5,000 Red Sep'23 96.25/97.37 put over risk reversals, 31.0, and strike roll-downs: -2,500 short Sep 96.00/96.25/96.75 put flys 2.75 over short Sep 95.75/96.00/96.50 put fly. Looking for a rebound ahead the FOMC paper bought +10,000 short Jun 97.50 calls 1.5 vs. 96.42/0.05%.