Post-LIBOR Settle Update: 75Bp Hike Exp Holding Steady

Lead quarterly EDU2 trades -0.020 at 96.495 after latest 3M LIBOR set' climbs +0.02400 to new 3Y high of 2.78300% (+0.04543/wk).

• Rate hike expectations of 75bp next week (as well as the Sep meeting) holding steady with little change in futures: balance of Whites through Greens (EDZ2-EDM5) +0.010-0.020, Blues through Golds (EDU5-EDM7) weaker: -0.010-0.025.
• Front end inversion little off recent lows: Dec'22/Mar'23 at -0.145. Most inverted calendar spds: EDZ2/EDZ3 at -0.630 vs. -0.810 last Thu, EDH3/EDH4 at -0.615. Inversion starts to flatten out in Green Jun'25 vs. Blue Sep trading +0.010.
• Modest volume on narrow ranges and lower implieds continued Wednesday. With a few exceptions, option trade rotated centered on downside puts as underlying futures reversed early session gains to mildly lower across the curve by the bell.
• A large limited downside protection for year end hikes via SOFR options had paper buy over +17,000 SFRZ2 95.00/95.50/96.00 put flys, 4.0 ref 97.015. Prior put skew buy block: +5,000 SFRZ2 95.75/96.00/96.25 put flys even over the SFRZ2 97.25/97.50 call spds. Muted Eurodollar option flow included +8,500 Dec 99.00/99.62 put spds and 5,000 Sep 99.50/99.75 put spds.