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Post-LIBOR Settle Update

US EURODLR FUTURES

Lead quarterly EDM2 trading higher: 98.495 (+0.030) after latest 3M LIBOR settle falls -0.00529 to 0.96157% (-0.02129/wk) total on week now after climbing to 1.00600% Tuesday -- highest since April 2020.

  • Balance of Whites (EDU2-EDH3) trade +0.055-0.080 higher Reds (EDM3-EDH4) through Golds (EDM4-EDH7) trading +0.065-0.080 higher as market pricing in multiple rate hikes for 2022 gradually recedes (198bp from 220bp on Monday).
  • At odds with hawkish Fed messaging -- "it is clear that removing accommodation is required. How much and how aggressively accommodation should be removed is far more uncertain," KC Fed George said Wed.
  • Uncertainty over pricing in forward policy and/or confidence in Fed managing a soft landing/avoiding recession remains evident as longer expirys continue to outperform. First price inversion holding at Red Jun'23 (96.90) vs. Red Sep'23 (96.91). Inversion flattens out in Golds (EDM6-EDH7) w/ strip trading around 97.67-.66.
  • Wed's derivatives recap: mixed on moderate volumes. Early buyers of low delta calls and puts turned two way by midday as underlying FI futures reversed early losses, extended higher in second half. Eurodollar options included buyer of 15,000 short Jul 98.62/98.87 call spds, 3.0 vs. 96.85/0.06%.
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