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Post-LIBOR Settle Update: Implied Hikes Inching Higher


Lead quarterly Mar'23 (EDH3) -0.030 at 94.9175 after 3M LIBOR set' climbs +0.01443 to new 16 year high of 4.91529% (+0.04586/wk). Lead quarter actually off lows as set' not as high as anticipated.

  • Fed funds implied hike for Mar'23 at 28.2bp, May'23 cumulative 52.0bp to 5.106%, Jun'23 67.4bp to 5.260%, terminal at 5.30% in Aug'23.
  • Balance of Eurodollar Whites (EDM3-EDZ3) -0.065-0.090, Reds (EDH4-EDZ4) -0.085-0.065, Greens through Golds (EDH5-EDZ7) -0.060-0.040.
  • Current deferred spds vs. prior settles:
    • Jun'23/Sep'23: +0.090 vs. +0.075
    • Mar'23/Red Mar'24: -0.1525 vs. -0.2075
    • Jun'23/Red Jun'24: -0.970 vs. -0.975
  • Thursday derivatives highlights: Low delta put volumes in midcurves and longer expirys remain robust as underlying sells off - gradually pricing in chances of policy pivot back to 50bp hikes if inflation worsens (Mester and Bullard).

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