Post-LIBOR Settle Update: 3M LIBOR Tops 5%, Implied Hikes Up

Lead quarterly Mar'23 (EDH3) dips -0.0075 to 94.92 after 3M LIBOR set' climbs over 5% for first time in 16 years: 5.00800% (+0.02400).

• Fed funds implied hike for Mar'23 at 30.5bp, May'23 cumulative 59.3bp to 5.170%, Jun'23 77.5bp to 5.353%, terminal at 5.445%-5.450% in Aug'23-Oct'23 vs. early Thursday's 5.51% cycle high.
• Balance of Eurodollar Whites (EDM3-EDZ3) -0.005 to steady, Reds through Golds (EDH4-EDZ7) +0.010-0.035.
• Current deferred spds vs. prior settles:
  • Jun'23/Sep'23: +0.145 vs. +0.150
  • Mar'23/Red Mar'24: +0.160 vs. +0.1775
  • Jun'23/Red Jun'24: -0.710 vs. -0.690
• Option roundup: Better low delta put structures in SOFR and Tsy options, fading bounce in underlying off Thu's lows in early trade turned mixed by midday as underlying futures marched higher into the close. Largest position build over shortest period of time in SOFR options: 100,000 Red Sep'24 98.50/99.50/100.50 put flys, 0.5 - purpose of trade most likely to plug portfolio risk associated w/ near 4% bp drop in interest rates by fall of 2024