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Post-LIBOR Settle Update: Benchmark Rising

US EURODLR FUTURES

Lead quarterly EDU2 pares gains to +0.010 to 96.6375 after latest 3M LIBOR set' climbs +0.03314 to new 14Y high: 3.04314%, +0.08543 total on wk.

  • Balance of Whites (EDZ2-EDM3) trades +0.020-0.040, Reds through Blues (EDU3-EDM6) trade +0.040-0.010, Golds (EDU6-EDM7) -0.005-0.010.
  • Current inversion pricing: Mar'23/Jun'23 -0.070 (Dec'22/Mar'23 +0.035); calendar spds: EDZ2/EDZ3 at -0.395, EDH3/EDH4 at -0.575. Inversion flattens out in Blues: Mar'26/Jun'26 trading flat.
  • More mixed FI option trade Wednesday appeared to favor upside call and call structure buying, taking advantage of weaker underlying futures to fade the move in the lead-up to Friday morning (1000ET) appearance by Fed Chairman Powell at the Jackson Hole economic summit. Will Powell be hawkish (in the face of softer economic data the last few weeks), will he pivot (due to same data), will he try to thread the needle with some stance in the middle?
  • Wed's trade could be loosely described as favoring the pivot: less hawkish rhetoric from the chairman will likely see FI markets rally, and curves bull steepen in the short term. However, given the amount of time and data yet to come between the summit and the next FOMC announcement on September 21 - it's all more likely just short term squaring rather than a major shift in positioning.

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