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SOFR Futures: Short End Gaps Lower

US EURODLR FUTURES
Lead quarterly EDZ2 catching up with the sell-off out the strip (Reds: EDZ3-EDU4 underperforming -0.155-0.165), reverses support from +0.0075 to -0.020 at 94.85 last couple minutes (not related to the in-line Tsy auctions).
  • Rates sold off after StL Fed Bullard discussed economy/monetary policy this morning: Fed policy not at "sufficiently restrictive level" while hikes have "only had limited impact" on stemming rise in inflation.
  • SOFR futures under heavy pressure as well: SFRZ2 -0.025, balance of Whites (SFRH3-SFRU3) -0.080-0.130, Reds -0.130-0.160.
  • Note: SOFR usage surging as end of 3M LIBOR benchmark draws closer*: total volume in first four quarterly futures (SFRZ2-SFU3) is currently 182k, compares to Eurodollar (EDZ2-EDU3) of 309k.
    • *On March 5, 2021, IBA (ICE Benchmark Administration) stated that it will cease the publication of the overnight, 1, 3, 6 and 12 months USD LIBOR settings immediately following the LIBOR publication on Friday, June 30, 2023

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