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Post-LIBOR Settle Update: Dec Step-Down Expectations Steady

US EURODLR FUTURES

Lead quarterly Dec'22 (EDZ2) bounces +0.0075 to 95.0175 high after latest 3M LIBOR set' recedes -0.01057 to 4.66486% (+0.05872/wk).

  • Dec step-down expectations steady as Fed funds implied hike for Dec'22 holds at 50.9bp, Feb'23 cumulative 87.9bp to 4.732%, terminal back over 5% at 5.015% in Jun'23 -- getting near pre-CPI 5.08% after hawkish comments from StL Fed Bullard early Thu.
  • Balance of Whites (EDH3-EDU3) -0.020-0.040, Reds through Golds (EDZ3-EDU7) currently -0.055-0.040, Reds underperforming. Deferred spds off Thu's lows:
    • Jun'23/Sep'23 -0.190 vs. -0.240 early Thu;
    • Dec'22/Red Dec'23 at -0.210 vs. -0.360,
    • Mar'23/Red Mar'24 at -0.810 vs. -0.935,
    • Jun'23/Red Jun'24 at -1.165 vs. -1.295 prior cycle low.
    • Inversion flattens out in early Blues: EDZ5-EDH6 +0.005.
  • Thursday option roundup: Downside insurance buyers via puts, absent since the Oct CPI miss renewed hopes for rate hike step-down in December into early 2023 (and eventually revitalizing talk of rate cuts later next year), are seeing a comeback on today's sell-off in Eurodollar and SOFR futures: Reds (Dec'23-Sep'24) -0.120-0.140.
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Lead quarterly Dec'22 (EDZ2) bounces +0.0075 to 95.0175 high after latest 3M LIBOR set' recedes -0.01057 to 4.66486% (+0.05872/wk).

  • Dec step-down expectations steady as Fed funds implied hike for Dec'22 holds at 50.9bp, Feb'23 cumulative 87.9bp to 4.732%, terminal back over 5% at 5.015% in Jun'23 -- getting near pre-CPI 5.08% after hawkish comments from StL Fed Bullard early Thu.
  • Balance of Whites (EDH3-EDU3) -0.020-0.040, Reds through Golds (EDZ3-EDU7) currently -0.055-0.040, Reds underperforming. Deferred spds off Thu's lows:
    • Jun'23/Sep'23 -0.190 vs. -0.240 early Thu;
    • Dec'22/Red Dec'23 at -0.210 vs. -0.360,
    • Mar'23/Red Mar'24 at -0.810 vs. -0.935,
    • Jun'23/Red Jun'24 at -1.165 vs. -1.295 prior cycle low.
    • Inversion flattens out in early Blues: EDZ5-EDH6 +0.005.
  • Thursday option roundup: Downside insurance buyers via puts, absent since the Oct CPI miss renewed hopes for rate hike step-down in December into early 2023 (and eventually revitalizing talk of rate cuts later next year), are seeing a comeback on today's sell-off in Eurodollar and SOFR futures: Reds (Dec'23-Sep'24) -0.120-0.140.