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Post-LIBOR Settle Update: New 3M High Weighs Lead Quarterly

US EURODLR FUTURES

Lead quarterly EDM2 dips -0.0025 to 98.2275 after latest 3M LIBOR set' gains another +0.02200 to new 2Y high of 1.59786% (+0.09143/wk). Midweek cooling of rate hike pricing for the fall pauses w/ balance of Whites (EDU2-EDH3) currently trading steady to +0.015, Reds-Golds (EDM3-EDM7) steady to +0.020-0.030 w/ Greens-Blues lagging.

  • Inversion holds to front Reds: low mkt measure of confidence in Fed managing a soft landing/avoiding recession has extended: Red Sep (EDU3) currently trading 96.96 vs. Red Jun (EDM3) at 96.865. Levels start to flatten out (dis-invert) around Blue Sep'25-Dec'25 trading 97.245.
  • Thursday FI option trade recap: Mixed FI option trade Thu as SOFR and Eurodollar options focused on upside calls as underlying futures in the short end outperformed as rate hike pricing through the fall moderated (chance of 50bp hike in Sep well below 50%). Treasury options focused on puts while trade volumes evaporated as longer rates traded weaker ahead midday.
  • Conditional curve trade included a sale of 20,000 short Jun 97.25 calls vs. Blue Jun 97.62 calls, 1.0 net bull flattener as paper faded the steeper curves on the day. Salient call trade included 8,500 Jun 98.25/98.31 call spds, 5,000 short Aug 96.50/97.00 call spds, 12.5 and 6,000 Blue Sep 98.25 calls.
  • SOFR option Block trade had paper buying 1,500 SFRU2 97.43/97.56/97.68/97.93 call condors, 0.5 belly over.
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