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Post-LIBOR Settle Update: Ebb & Flow Ahead July CPI

US EURODLR FUTURES

Lead quarterly EDU2 holds steady at 96.555 after latest 3M LIBOR set' inches +0.00171 to new high of 2.92271% (+0.05600/wk) - level not seen since late 2008.

  • Focus on this morning's CPI (MoM: 0.2% est vs. 1.3% prior; YoY 8.7% est vs. 9.1% prior) as futures scale back from modest late overnight highs: balance of Whites (EDZ2-EDM3) trade +0.005-0.010, Reds through Blues (EDU3-EDM6) +0.020 to steady, Golds (EDU6-EDM7) lagging at -0.005-0.010.
  • Another hot read for the inflation metric will see futures reverse course as another 75bp rate hike in Sep gets penciled in.
    • The Fed will be prepared to hold interest rates "higher for longer" should inflation continue to surprise to the upside, and market pricing will need to adjust accordingly, Federal Reserve Bank of St. Louis President James Bullard told MNI Tuesday, MNI FedSpeak podcast. "If we do get inflation slowing down, then we may be able to hold the rate at that higher rate for that period of time."
  • Meanwhile, Tsy 2s10s yield curve little off 22Y inverted lows after nearly breached -0.500 Tue (-56.0 low in Apr 2000, compares to record -241.65 low in March 1980), Eurodollar front end inversion bounces slightly: Dec'22/Mar'23 at -0.045. Most inverted calendar spds: EDZ2/EDZ3 at -0.640, EDH3/EDH4 at -0.775. Inversion flattens out in Blues Mar'26/Jun'27 trading flat at 97.385.
  • Rate hike insurance buying via SOFR and Eurodollar puts continued Tuesday, supporting low-delta volatility vs. slightly lower at-the-money vol (lack of real vol on range in underlying) in the lead up to Wednesday's July CPI read.
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Lead quarterly EDU2 holds steady at 96.555 after latest 3M LIBOR set' inches +0.00171 to new high of 2.92271% (+0.05600/wk) - level not seen since late 2008.

  • Focus on this morning's CPI (MoM: 0.2% est vs. 1.3% prior; YoY 8.7% est vs. 9.1% prior) as futures scale back from modest late overnight highs: balance of Whites (EDZ2-EDM3) trade +0.005-0.010, Reds through Blues (EDU3-EDM6) +0.020 to steady, Golds (EDU6-EDM7) lagging at -0.005-0.010.
  • Another hot read for the inflation metric will see futures reverse course as another 75bp rate hike in Sep gets penciled in.
    • The Fed will be prepared to hold interest rates "higher for longer" should inflation continue to surprise to the upside, and market pricing will need to adjust accordingly, Federal Reserve Bank of St. Louis President James Bullard told MNI Tuesday, MNI FedSpeak podcast. "If we do get inflation slowing down, then we may be able to hold the rate at that higher rate for that period of time."
  • Meanwhile, Tsy 2s10s yield curve little off 22Y inverted lows after nearly breached -0.500 Tue (-56.0 low in Apr 2000, compares to record -241.65 low in March 1980), Eurodollar front end inversion bounces slightly: Dec'22/Mar'23 at -0.045. Most inverted calendar spds: EDZ2/EDZ3 at -0.640, EDH3/EDH4 at -0.775. Inversion flattens out in Blues Mar'26/Jun'27 trading flat at 97.385.
  • Rate hike insurance buying via SOFR and Eurodollar puts continued Tuesday, supporting low-delta volatility vs. slightly lower at-the-money vol (lack of real vol on range in underlying) in the lead up to Wednesday's July CPI read.