### POV, HEDGING FOR MILD........>

US EURODLR OPTIONS: ### POV, HEDGING FOR MILD RETRACE RATE-CUT FEVER

- Interpreting recent ratio put fly: +30,000 (pit/screen) short Sep 81/82/83

2x3x1 put flys, 0.5 net/wings over. The buyer of the ratio put fly that expires

a couple days prior to the Sep 18 FOMC, is looking for Red Sep'20 futures (EDU0

currently trading around 98.48 after tapping 98.515 earlier) to unwind a modest

portion of current rate premium cut priced in over last 24 hours. 

- MNI PINCH model (OIS over LIBOR derived) currently assigns 100% of another

25bp rate cut at the next meeting while a 50bp cut assigned little over 6%

(another 25bp cut at the October 30 FOMC is running around 64%).

- Though several trading desks felt the tariff-tied rally sparked after Pres

Trump's tweet late yesterday is overdone, it has spurred some dealers to

reconsider their forward rate cut guidance to include some amount of dovishness.

- Though lead quarterly EDU9 futures lead rally at moment +0.050, markets did

see some risk-off unwind after Trump and advisors tried to soften the tone of

yesterday's message with "nothing definitive." Further unwind in front end

certainly possible here.