Post-LIBOR Settle Update: 3M Dip

Lead quarterly EDU2 pares losses slightly, currently trading 96.72 (-0.030) after 3M LIBOR set' dips -0.00286 to 2.23157% after climbing +0.13857 total last wk to highest level since July 2019 last Friday.

• Last wk Thu's sharp rate hike repricing continues to moderate slightly as futures trade lower out the strip: balance of Whites through Reds (EDZ2-EDM4) trading steady to -0.035-0.055, Greens through Golds (EDU4-EDM7) -0.045-0.055.
• Recession expectations priced in front end cools slightly as Dec'22/Mar'23 trades flat now, Mar'23/Jun'23 inverted by -0.095. Most inverted calendar spd: EDH3/EDH4 at -0.445 vs. -0.500 last week.
• While near-term rate hikes remain (75bp new Fed baseline) since last week's testimony from Fed Chair Powell, softer data (last Thu's second consecutive weak PMIs) has futures pricing end of rate hikes has migrated from mid-2023 to end of this year.
• Friday option roundup: Difficult to draw any conclusions from Friday's FI option trade, flow two-way, mixed on light volumes, vol sellers in Treasury options as underlying futures scaled back from the week's rally (30YY climbed to 3.2640% high on day vs. 3.1632% low).
• SOFR options set the theme was flurry of limited up- and downside flys in late morning trade:
  • +8,000 (3k Block) SFRQ2 97.12/97.25/97.37 call flys, 1.5
  • +8,000 (3k Block) SFRU2 97.12/97.25/97.37 call flys, 1.25
  • +5,000 SFRV2 95.75/96.00/96.25 put flys, 2.0