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Post-LIBOR Settle Update: Maintaining Strong Bid

US EURODLR FUTURES

Lead quarterly EDU2 holding strong bid at 96.705 (+0.030) after latest 3M LIBOR set' new 3Y high of 2.48300% (+0.06000/wk).

  • Forward Fed hike expectations moderate slightly: balance of Whites (EDZ2-EDM3) trades +0.075-0.105; Reds through Golds (EDU3-EDM7) +0.090-0.080.
  • Front end inversion back to last week's lvls: Dec'22/Mar'23 at -0.125. Most inverted calendar spds: EDZ2/EDZ3 and EDH3/EDH4 both at -0.660. Inversion starts to flatten out in latter half of Greens w/ EDH5/EDM5 trading steady (97.245).
  • Mon's minimal option volume still centered on downside puts, hedge/insurance vs. more aggressive rate hikes despite underlying futures moderating forward expectations after last Fri's strong jobs gain for Jun (+372) saw 10YY climb back to 3.099%.
  • Highlight Eurodollar trade includes +25,000 (20k Blocked) ec 96.00/96.50 put spreads at 27.0 ref 96.23. Salient Treasury option trade had paper selling 22,000 TYU 115.5/121.5 call over risk reversals from 0.0-1.0 while 5Y options included a scale buyer of over 25,000 FVU 111.5 puts from 50-53. Lone upside call trade: 39,000 TYU 119/121 call spreads at 35 ref 117-27 to -27.5.
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