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Post-LIBOR Settle Update: 3M Benchmark Over 4.0%

US EURODLR FUTURES

Lead quarterly Dec'22 (EDZ2) extends low to 95.105 (-0.040) after latest 3M LIBOR set' climbs +0.07015 to new 14Y high of 4.01086% (+0.10215/wk).

  • Short end anchored to 75bp hike at Nov FOMC, while the balance of Whites through Reds (EDH3-EDU4) +0.010-0.040, Greens (EDZ4-EDU5) +0.025 to -0.005, Blues-Golds (EDZ5-EDU7) -0.010-0.045.
  • Current inversions: Mar'23/Jun'23 -0.065; Dec'22/Red Dec'23 at -0.265, Mar'23/Red Mar'24 at -0.485, Jun'23/Red Jun'24 at -0.595. Inversion flattens out with Blue Dec'25/Mar'26 both trading 96.12.
  • Option roundup: better volumes resumed Tuesday with participants back from extended holiday weekend, outright put and put spreads outpacing calls on two-way flow.
    • Large Eurodollar spd included a sale of 40,000 Dec 95.12.95.50 put spds from 26.0 to 25.5 - rolling down the 95.50 strike. Salient SOFR options Block had an account purchase +20,000 SFRH3 95.62/96.25 call spds 5.5 over SFRH3 94.62/95.00 put spds.
    • Some chunky call trades reported, notable buyer of 40,000 Jan Eurodollar 95.25/95.43/95.81 broken call flys for 0.5 credit - looking to capitalize on a slow grind higher in underlying futures into early 2023 (looking for rate hike pricing to cool).

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