Post-LIBOR Settle Update: New Bench High, Dec Move Debate

Lead quarterly Dec'22 (EDZ2) trades -0.035 at 94.940 after latest 3M LIBOR set' resumes climb to new 14 year high: 4.41471% +0.04085 (+0.01543/wk).

• A 75bp hike at Nov FOMC remains a lock, while pricing another 75bp in Dec more debatable, particularly after Wed's lower than exp 50bp hike to 3.75%.
  • While last Fri's WSJ/Timiraos + Fed Daly comments over hiking too much helped take the pressure off yr-end expectations, some see risks swinging back towards hawkish again as Fed Chairman Powell likely to push back on less hawkish rate hike optimism and reiterate Sep messaging/DOT plot guidance.
  • Reminder, next employment report (covering October) is on November 4 - after the FOMC. An in-line read will likely tip the scales back toward 75bp hike in Dec.
• Balance of Whites (EDH3-EDU3) trade -0.045-0.050, Reds (EDZ3-EDU4) -0.060-0.080), Greens through Golds (EDZ4-EDU7) -0.080-0.105. Current inversions: Mar'23/Jun'23 -0.060; Dec'22/Red Dec'23 at -0.290, Mar'23/Red Mar'24 at -0.620. Inversion flattens out in Blue Dec'25-Blue Mar'26 trading 96.08.
• Option positioning: Better first half upside call buying evaporated in the second half as the post-BOC tied rally in underlying FI futures leveled out.