Post-LIBOR Settle Update: Moderating

Lead quarterly EDU2 trades steady to +0.005 at 96.715 after latest 3M LIBOR set' rebounds +0.00600 to 2.78829% (+0.02200/wk). Moderating, the 3M benchmark had gapped lower Thu - off Wed's highest level since Dec 31, 2018 (in turn - near highest level since late 2008) after the FOMC delivered a second consecutive 75bp hike while scaling back hawkish forward guidance for Sep.

• Short end rates continued to gain after Thu's GDP contracted by 0.9% in the second quarter, far below analyst expectations for a 0.4% gain -- futures pricing of next FOMC in Sep more in favor of 50bp as balance of Whites (EDZ2-EDM3) trades steady, Reds (EDU3-EDM4) +0.005-0.020, Greens (EDU4-EDM5) steady to +/-0.010, Blues through Golds (EDU5-EDM7 -0.015-0.030 with Blues underperforming.
• Front end inversion extends: Dec'22/Mar'23 at -0.195 vs. -0.160 early Thu. Most inverted calendar spds: EDZ2/EDZ3 at -0.735, EDH3/EDH4 at -0.670. Inversion starts to flatten out in Green Jun'25 vs. Blue Sep trading +0.010.
  
• Much better downside put volume reported Thursday as underlying futures rallied in response to U.S. GDP contracting 0.9% in the second quarter, far below analyst expectations for a 0.4% gain. Underlying futures rallied as more aggressive rate hike expectations evaporated, 50bp hike more likely at the next Fed policy meeting in Sep than 75bp.
• Eurodollar and SOFR option volumes were light (Block sale of 20,000 Sep 96.50/96.62 put spds at 3.5; -20,000 SFRM3 95.75/95.87 put spds, 2.0 vs. 96.995/0.05%) compared to Treasury options where 10Y put unwinds and repositioning trades noted (-30,000 TYU 115/116 put spds at 1; Block 10,000 TYU2 118.5/120 put spds, 26 vs. 120-27.5/0.18%).