Post-LIBOR Settle Update: Anticipation of 100Bp Hike Cools

Markets likely anticipated more of a drop in the 3M benchmark as lead quarterly EDU2 slips 0.005 to 96.465 after latest 3M LIBOR set' slips -0.00272 to 2.73757% this after gapping +0.22829 higher Thu to new 3.5Y high of 2.74029%, benchmark currently up +0.31457 total for the wk.

• Short end surged higher late Thu after Fed Gov Waller, StL Fed Bullard tamped down on mkt pricing aggressive 100bp hike at July 27 FOMC, both supporting 75bp hike. Though June CPI may have "anchored" Waller's 75bp hike expectation in a couple weeks, he would "lean toward larger, full-point" hike if "retail sales, housing data are 'materially stronger than expected'.
• Balance of Whites through Reds (EDZ2-EDM4) trade +0.035-0.010 higher, Greens (EDU4-EDM5) steady to +0.005, Blues through Golds (EDU5-EDM7) +0.010-0.035, Golds outperforming.
• Front end inversion off recent lows: Dec'22/Mar'23 at -0.170 vs. -0.230 Thu. Most inverted calendar spds: EDZ2/EDZ3 at -0.755 vs. -0.810 Thu, EDH3/EDH4 at -0.715. Inversion starts to flatten out in Green Jun'25 vs. Blue Sep +0.020. Outsized put spread trade early Thursday evaporated by late morning as underlying futures in the short end gapped higher as hawkish rate hike expectations cooled suddenly.
  
• Some early highlight Eurodollar trade included a buy of 6,200 Sep 95.87/96.12/97.25/97.50 put condors and 21,300 Sep 96.75/Mar 96.12 put calendar spds. Treasury Options more mixed with two-way in 5Y puts: -9,000 FVQ 111.25/111.5 put spds, 6.5 after overnight Blocks: 10,000 FVU 111/111.25 put spds, 5.5 and 12,500 FVU 111.25 puts, 43.5 vs. 111-30.75/0.40%.