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Post-LIBOR Settle Update: Post-CPI Step-Down Pricing

US EURODLR FUTURES

Follow-through post-CPI bid in in lead quarterly Dec'22 (EDZ2) trades +0.015 at 95.01 (94.885 pre-CPI Thu) after latest 3M LIBOR set' falls -0.04357 to 4.60614% (+0.05585/wk).

  • Fed funds implied hike for Dec'22 at 49.8bp vs. 57.5bp early Thu, Feb'23 cumulative 85.2bp to 4.701% (vs. 96.3bp to 4.81% pre-CPI), terminal 4.91% in Jun'23 (5.08% pre-CPI)
  • Balance of Whites through Reds (EDH3-EDU4) scale back small portion of Thu's rally, currently -0.040-0.070 (Reds +0.400 yesterday), Greens through Golds (EDZ4-EDU7) currently -0.040-0.010.
  • Deferred calendar spds extend inversion: Mar'23/Jun'23 -0.025, Jun'23/Sep'23 -0.265; Dec'22/Red Dec'23 at -0.365, Mar'23/Red Mar'24 at -0.890, Jun'23/Red Jun'24 at new cycle low of -1.110. Inversion flattens out in early Blues: EDZ5-EDH6 both 96.48.
  • Heavy volumes with better call buying on net Thursday as underlying rates gapped higher on softer than expected CPI inflation data. Receding rate hike expectations for year end/early 2023 spurred heavy call buying in SOFR and 5-10Y Treasury options, puts two-way with mix of position unwinds and new buys as some looked to fade the rally.
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