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Post-LIBOR Settle Update, 3M Jumps Higher

US EURODLR FUTURES
Lead quarterly EDH2 remains under pressure after latest 3M LIBOR set surges +0.01000 higher to new high of 0.27757% (+0.01986/wk) last seen mid-August 2020. Levels weaker out the strip, Reds through Green (EDH3-EDZ4) underperforming.
  • First FOMC policy announcement of 2022 sets the stage, while Eurodollar futures gradually price in more than just four quarterly 25bp hikes starting in March: June22 futures trading 99.215 as talk of 50bp hike starts to filter through.
  • Not a certainty, but option accts hedging the risk of tighter than expected forward policy: On Tuesday, paper bought June put condor below, hedging for 50bps hike in addition to 25bps liftoff from Fed in March. EDM2 currently trading 99.265.
    • +5,000 Jun 98.93/99.00/99.06/99.12 put condors, 1.0 vs. 99.29/0.05%
  • Elsewhere, targeting five 25bp quarterly hikes starting this March through March 2023, paper adding to bear curve (Whites/Greens) steepener:
    • +15,000 short Mar 98.50/Green Mar 98.00 put spds, 0.25/Greens over
  • Meanwhile, debate over timing of balance sheet run-off, quantitative tightening sometime after conclusion of quantitative easing in March will remain active for some time.
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