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Post-LIBOR Settle Update: Implied Mid-Year Rate Cut Returns

US EURODLR FUTURES
  • Lead quarterly Eurodollar futures EDM3 pares broader gains, currently +0.095 at 94.99 after 3M LIBOR settles falls -0.03386 to 4.90714% (-0.23100/wk). Benchmark settle lost in the mix amid heavy volatility/wide ranges this morning: (EDM3 94.71 low/95.155 high)
  • Off overnight highs, balance of the Eurodollar Whites (EDU3-EDH4) currently +0.275-0.190 after US bank jitters extend to European banks overnight, heavy selling in BNP Paribas, Credit Suisse, Societe Generale.
  • Peak Fed terminal rate at 4.82% in May'23 (vs. 5.69% in August last week) as mid-year rate cut expectations return.
  • Fed funds implied hike for Mar'23 at 14.3bp, May'23 cumulative 22.4bp to 4.821%, Jun'23 2.3bp to 4.611%. Rate cuts pricing in for the July 26 FOMC, cumulative of -30.5 to 4.283%.
  • Option roundup: Heavier block/cross volume remains mixed: recent put buying looking for underlying to continue to reverse Monday's banking crisis driven rally recedes as better call buyers look for rebound on softer monetary policy guidance.

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