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Post-LIBOR Settle Update, 3M New Highs

US EURODLR FUTURES
Lead quarterly EDH2 remains under pressure (-0.035 at 99.455) after latest 3M LIBOR set' surged +0.01757 to 0.31657% (+0.05886/wk) -- new highest level since May 2020. Parallel shift lower in Whites-Golds (EDH2-EDZ6): -0.030-0.040.
  • Market continues to gradually price in more than 100bps total hikes for 2022 since Wed's FOMC: EDH2 starting to price in chance of 50bp hike while Jun'22 50bp hike near fully priced in.
  • Debate over size and speed of liftoff: some dealers, Nomura for example, expect a 50bp hike in March, while Wells Fargo sees 25bp hike in May adding to four quarterly hikes (+125bp/yr).
  • Policy uncertainty/inflection point remains Green Dec'24 (97.910) inverted vs. most of the Blues (EDH5-EDU5) -- steady vs. Blue Dec'25.
  • Option accounts actively adding to downside insurance/rate hike positions: late Thu block cross as one example: +10,000 Red Mar'23 96.75p 5.0 w/ Red Sep 96.75/97.75 put strip 50.5 cvrd. On the flipside, some significant unwinds reported even before the NY open: -60,000 short Mar 98.25 puts, 8.5-7.5.

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