Post-LIBOR Settle Update, Option Tone

Lead quarterly EDH2 dips but still off overnight low after latest 3M LIBOR climbs to highest level since Aug 2020: +0.00943 to 0.26714% (+0.01642 total last wk).

• Balance of Whites through Greens (EDH2-EDZ4) trading weaker as mkt continues to price in tighter forward policy expectations from the Fed: four .25bp quarterly hikes starting this March, another two-three in 2023.
• Uncertainty increases in late 2024 as EDZ4 (98.005) trades inverted vs. most of the Blue pack (EDH5-EDZ5).
• Last week saw some downside rate-hike long put position unwinds as underlying futures rebounded, but longer-term policy lift-off theme likely to prevail, expect put skew to remain largely bid over corresponding OTM calls.
  
• On the flip-side, exogenous geopolitical risk tied to Russia/Ukraine tension likely to spur better call buying, underlying support if diplomacy fails and Ukraine invasion comes to fruition.