Post-LIBOR Settle Update: 3M Rebounds

Lead quarterly EDU2 holding at 96.72 (-0.010) after 3M LIBOR set' rebounds +0.01886 to 2.25043% (highest since early Aug 2019), up +0.01600 for the week after modest decline Mon.

• Last wk's sharp rate hike repricing continues to moderate as futures trade lower out the strip, near-term rate hikes remain w/75bp new Fed baseline. Balance of Whites through Reds (EDZ2-EDM4) trading -0.040-0.055, Greens through Golds (EDU4-EDM7) -0.060-0.070.
• Recession expectations priced in front end: Mar'23/Jun'23 inverted by -0.110. Most inverted calendar spd: EDH3/EDH4 at -0.445 vs. -0.500 last week.
• Monday option roundup: Light summer volumes setting in, flow mixed with Eurodollar options focused on upside calls while the SOFR options (replacing Eurodollar options in June 2023) and Treasury options focused on downside puts.
• Fading the sell-off in underlying rates, Eurodollar options saw better upside call volume. Salient trade: block buy of +10,000 Jul 96.62/96.87/97.12 call flys, 3.75 over Jul 96.25/96.56 call spds. Negative rate hedging continues with paper buying 100.12 and 100.25 calls in Red Sep'23 expirys.
• SOFR option trade included modest put fly blocks in August and October expirys while Treasury option trade included put spread buying in 5s, 10s and 30s. Wk1 10Y midcurve options drew largest volume with 30,000 wk1 TY 113/114 put spds trading early.