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Post-LIBOR Settle Update: Fed Terminal Recedes Ahead NFP

US EURODLR FUTURES
  • Higher futures continue to unwind higher rate hike expectations ahead this morning's employment data. Lead quarterly Eurodollar futures, March'23 (EDH3) trading +0.025 at 94.8275 after 3M LIBOR settles -0.01557 off Thursday's 16Y high to 5.13814 (+0.15414/wk).
  • Fed terminal rate has fallen to 5.495 in August'23, compared to 5.69% early Thursday high for October'23.
  • Fed funds implied hike for Mar'23 at 37.9bp vs 42.1bp early Thursday, May'23 cumulative 69.4bp to 5.268%, Jun'23 87.1bp to 5.445%.
  • Eurodollar futures are trading firmer across the strip, Reds (EDH4-EDZ4) outperforming: +0.135-0.090.
  • Option roundup: amid ongoing rate hike hedging via low delta puts Thursday, volume in upside call structure buying surged as underlying futures rebounded from week lows ahead of Friday's employment data. Tsy 2s10s curve surged over 10.60bp steeper to -97.855 as bonds trim gains into the close, while 2s continue to rise: TUM3 at 101-21.5 (+11.12) at the moment, 2Y yield falls to 4.8784% low (compares to over 5.08% earlier in week)

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