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Post-LIBOR Settle Update: Pricing in Higher for Longer

Lead quarterly Dec'22 (EDZ2) extends low to at 95.22 (-0.065) after latest 3M LIBOR set' climbs +0.08300 to new 14Y high of 3.90871% (+0.15400/wk).
  • Pricing in increased odds of 75bp hikes in Nov and Dec while the balance of Whites (EDH3-EDU3) shift lower: -0.065-0.050, Reds through Golds (EDZ3-EDU7) -0.050-0.025, Greens outperforming slightly.
  • Current inversion pricing off recent lows: Mar'23/Jun'23 -0.020; Dec'22/Red Dec'23 at -0.175, Mar'23/Red Mar'24 at -0.440, Jun'23/Red Jun'24 at -0.600. Inversion flattens out with Blue Dec'25/Mar'26 both trading 96.21.
  • Much better put and put spread buying Thursday, focus on hedging tighter policy and effect on underlying futures. Salient trade, ongoing Green Dec'24 SOFR 93.50/94.00/94.50 put flys at 2.5 - adds to appr +33k late last week, same price. Green Dec SOFR futures currently trade 96.345.

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