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Post-LIBOR Settle Update: 3M Recedes

Lead quarterly EDM2 pares losses slightly, currently -0.0075 at 98.17 after latest 3M LIBOR set' recedes -0.00743 off Mon's 2Y high of 1.45500% to 1.44757% (+0.00386wk).
  • Balance of Whites (EDU2-EDH3) trade -0.030-0.070 lower, Reds (EDM3-EDH4) -0.085 lower, Greens through Golds (EDM4-EDH7) -0.085-0.045 w/ Golds outperforming.
  • Inversion holds to front Reds (mkt measure of confidence in Fed managing a soft landing/avoiding recession): Red Sep (EDU3) currently trading 96.74 vs. Red Jun (EDM3) at 96.64. Levels start to flatten out (dis-invert) around Blue Sep'25-Dec'25 trading 97.075-.06.
  • Monday FI option trade recap: listed option trade faded Mon's rally favored downside/rate hike insurance buying via puts across the curve. Underlying driver: the Fed likely needs to move mon-pol to a restrictive stance to contain inflation, Cleveland Fed Pres Mester told MNI Mon, warning the Fed's estimate of nominal longer run fed funds rate of 2% to 3% might still leave policy too accommodative.
  • Highlight trade in SOFR options: Total 11,000 SFRQ2 97.25/97.43/97.50/97.62 2x2x1x1 put condors, for net level 1.0/belly over at 1156:00ET. Same structure Blocked early Friday 6.3k from 0.75-1.0 as acct loads up on downside/rate hike insurance. SFRU2 futures currently trading 97.665 (+0.010)
  • Limited downside put fly buying in Eurodollar options included 10,000 Jun 96.25/96.50/97.00 broken put flys, 3.5 vs. 97.40/0.10%, and 5,000 short Jun 96.25/96.50/96.75 2x3x1 put flys, 1.0.

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