Post-LIBOR Settle Update: 3M Inches Higher

Lead quarterly EDM2 holding modestly higher at 98.355 (+0.005), extending pre-NY open lows after latest 3M LIBOR settle climbs +0.00243 to 0.98886% (+0.02686/wk), compares to 1.00600% from Tue, March 29 -- highest since April 2020.

• Modest carry-over buying in near term futures, adjusting to Mar FOMC minutes likely plan for a monthly cap on runoff rising to $95B ($60B Tsy, $35B MBS) phased in “over a period of three months or modestly longer,” while officials consider one or more 50BP rate hikes this year
• Balance of Whites (EDU2-EDH3) trade +0.020-0.050 higher, Reds through Greens (EDM3-EDH5) +0.060-0.040, outpacing Blues (EDM5-EDH6) +0.030-0.020, Golds lagging at +/-0.010.
• Longer expirys continue to outperform in low measure of confidence in forward policy and/or Fed managing a soft landing/avoiding recession. First price inversion holding at Red Jun'23 to Red Sep'23 flat at 96.64 vs. Red Dec'23 at 96.75. Inversion flattens out in late Golds (EDMZ-EDH7) trading around 97.33.
• Highlight option trade from Wednesday: Put volume remained heavy Wednesday, pausing briefly in the post March FOMC minutes whipsaw trade as markets grapple with pricing in prospect of more aggressive policy if inflation persists
• Notable Block sale of -40,000 Sep 96.62/97.12/97.75/98.00 put condors crossed 8.5 -- likely a roll-down in strikes. Conditional bear curve steepeners noted: selling Aug 97.31/97.62 put spds vs. short Jun 95.93/96.37 put spds followed by sale of May 98.25/98.37 put spds 0.5 over Green Jun 96.50/96.62 put spds.