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Post-LIBOR Settle Update: More Selling After UK Fiscal Event

US EURODLR FUTURES

Grinding lower: lead quarterly Dec'22 (EDZ2) trading -0.055 at 95.195 -- actually near the middle of exceptionally wide range (95.14 to 95.27) -- after latest 3M LIBOR set' slips climbs 0.01243 to 3.64086% (+0.06314/wk), just below last Thu's 14Y high of 3.64143%.

  • Carry-over selling partially tied to London mkt pricing in chance of BOE emergency rate hike (before next BoE in Nov) in aftermath of UK gov's "Growth Plan" (ie fiscal event) and further comments from the Chancellor over the weekend that more tax cuts are to come.
  • Weaker levels on wide range for balance of Whites: (EDH3-EDU3) -0.035-0.050, Reds-Greens (EDZ3-EDU5) trades -0.085-0.140, Blues through Golds (EDZ5-EDU7) -0.115-0.080.
  • Current inversion pricing: Jun'23/Sep'23 -0.125; EDZ2/EDZ3 at -0.090, EDH3/EDH4 at -0.480, EDM3/EDM4 at -0.675. Inversion flattens out with Blue Sep'26/Gold Dec'26 both trading 96.32.
  • Friday option roundup: Much better option volumes Friday as underlying rates extended the week's lows (2YY tapped 4.2657% high) as markets continued to price in more rate hikes into year end. That said, option desks reported surge in upside call and call spread buying in 5- and 10Y Tsys options fading the sell-off as too far to fast.
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