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Post-LIBOR Settle Update: Anticipating More Hikes

US EURODLR FUTURES

Lead quarterly EDU2 +0.005 at 96.55, overnight low after latest 3M LIBOR set' climbs +0.00943 to new 22 year high of 2.92100% (+0.05429/wk).

  • Focus turns to Wed's CPI as futures price in increased chances of 75bp hike in Sep following last Fri's blowout July NFP (+528k vs. +250k est) as balance of Whites (EDZ2-EDM3) trade -0.005-0.025, Reds through Golds (EDEDU3-EDM7) -0.035-0.055.
  • After Tsy 2s10s yield curve fell new 22Y inverted low near -47.0 Mon (-56.0 all-time low in 2000), Eurodollar front end inversion bounces slightly: Dec'22/Mar'23 at -0.050. Most inverted calendar spds extend: EDZ2/EDZ3 at -0.665, EDH3/EDH4 at -0.795. Inversion starts to flatten out in Blues Dec''25-Mar'26 trading flat at 97.395.
  • Continued interest in downside put buying/rate hike insurance Monday despite the modest rebound in underlying rate futures. While some accts took the opportunity to unwind a portion of Friday's post-employment sell-off, option traders look to the potential for further declines in rates if Wednesday's CPI comes in hot again (current MoM 0.2% est vs. 1.3% prior, 8.7% YoY est vs. 9.1% prior). Salient trade, +20,000 SFRH3 96.00/96.25 put spds at 10.0.
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Lead quarterly EDU2 +0.005 at 96.55, overnight low after latest 3M LIBOR set' climbs +0.00943 to new 22 year high of 2.92100% (+0.05429/wk).

  • Focus turns to Wed's CPI as futures price in increased chances of 75bp hike in Sep following last Fri's blowout July NFP (+528k vs. +250k est) as balance of Whites (EDZ2-EDM3) trade -0.005-0.025, Reds through Golds (EDEDU3-EDM7) -0.035-0.055.
  • After Tsy 2s10s yield curve fell new 22Y inverted low near -47.0 Mon (-56.0 all-time low in 2000), Eurodollar front end inversion bounces slightly: Dec'22/Mar'23 at -0.050. Most inverted calendar spds extend: EDZ2/EDZ3 at -0.665, EDH3/EDH4 at -0.795. Inversion starts to flatten out in Blues Dec''25-Mar'26 trading flat at 97.395.
  • Continued interest in downside put buying/rate hike insurance Monday despite the modest rebound in underlying rate futures. While some accts took the opportunity to unwind a portion of Friday's post-employment sell-off, option traders look to the potential for further declines in rates if Wednesday's CPI comes in hot again (current MoM 0.2% est vs. 1.3% prior, 8.7% YoY est vs. 9.1% prior). Salient trade, +20,000 SFRH3 96.00/96.25 put spds at 10.0.