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Post-LIBOR Settle Update: 3M Benchmark New 22Y High

US EURODLR FUTURES

Lead quarterly EDU2 trades -0.010 at 96.615, holding overnight low after latest 3M LIBOR set' climbs +0.03100 to new 22 year high of 2.86329%, +0.07500 total for wk.

  • Pressure in short end continues after multiple Fed speakers (Daly, Mester, Evans, Kashkari) this week have reminded markets inflation is too high and that 75bp hike in Sep not off the table A Balance of Whites (EDZ2-EDM3) trades -0.005.
  • Modest rebound out the strip w/ Reds through Golds (EDU3-EDM7) +0.010-0.025 after SF Fed Daly clarified/softened her view slightly Wednesday saying 50bp hike in Sep a "reasonable thing to do." Mkts appeared to ignore MN Fed Kashkari comments after the close: inflation fight a bigger priority than recession, while market bets on rate cuts are very unlikely.
  • Front end inversion off lows: Dec'22/Mar'23 at -0.085 vs. -0.170 early Wednesday. Most inverted calendar spds/off lows: EDZ2/EDZ3 at -0.615, EDH3/EDH4 at -0.695. Inversion starts to flatten out in Blue Mar'26/Jun'26 trading +0.010.
  • FI option trade focused on better downside put insurance buying interspersed by upside call unwinds Wednesday as underlying futures traded weaker as Fed speakers continued to remind markets of Fed's resolve to knock down inflation.
  • Heavy short end selling continued as StL Fed Bullard on early CNBC interview echoed Daly and Mester's messaging: Fed job "nowhere near" complete in reining in inflation while needing months of "convincing evidence" that inflation has peaked. Meanwhile, SF Daly added Wednesday that markets are ahead of themselves expecting rate cuts in 2023.
  • SOFR option volume outpaced Eurodollar options, salient trade included sale of 20,000 SFRZ2 96.12/97.12 call over risk reversals, 1.25 vs. 96.625/0.48%, buy of 15,000 short Aug SOFR 96.12/96.62 put spds, 10.25-10.75 and 15,000 short Aug 96.12/96.62 put spds, 10.25-10.75.

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