EGB OPTIONS: Bobl Put Fly seller
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STIR: Fed Rates Little Changed, FOMC Minutes Likely More Notable Than Fedspeak
- Fed Funds implied rates are 0.5bp higher overnight for most near-term meetings, holding within yesterday’s range.
- Cumulative cuts from 4.08% effective: 22bp Oct, 43.5bp Dec, 53.5bp Jan, 64.5bp Mar, 71bp Apr and 85bp June.
- SOFR futures also see small moves on the day: H6 with marginal losses (-0.005) otherwise small gains beyond including +0.015 through blues and yellows.
- The SOFR implied terminal yield of 3.045% (SFRH7, -0.5bp) is also within recent ranges, eyeing a little more than 100bp of cuts ahead.
- Today’s Fedspeak focus should be on the FOMC Minutes from the Sept 16-17 meeting. Last month’s meeting revealed a lack of conviction on the FOMC about the rate path forward in both the SEP and then Chair Powell’s press conference.
- The median voter marked down their end-2025 rate 25bps to 3.5-3.75% (i.e. two further cuts in addition to the 25bp cut last month) but 2 members look for 1 cut and 6 members don’t expect another cut this year (and 1 would have preferred not to have cut at all last month).
- Other scheduled Fedspeak looks unlikely to materially add to monetary policy discussions. Nevertheless, for completeness:
- 0920ET – Musalem (’25 voter, hawk) welcoming remarks at community banking research conference
- 0930ET – Gov. Barr (voter) keynote at community banking research conference (text only)
- 1000ET – Goolsbee (’25) opening remarks at Chicago Payments Symposium
- 1515ET – Kashkari (’26) speaks at Center for Indian Country Development
- 1630ET – Kashkari (’26) hosts fireside chat with Senator Tina Smith
- 1745ET – Gov. Barr (voter) speaks on community development
- 1915ET – Goolsbee (’25) speaks at payments conference (text only)
US TSY FUTURES: Mix Of Long Setting & Short Cover Seen Tuesday
OI data points to a mix of net long setting (TU, FV & WN) and short cover (TY, UXY & US) as Tsy futures ticked higher on Tuesday.
- The most meaningful positioning swing came via the short cover seen in TY futures (~$2.4mln DV01), with the curve-wide net bias also tilted towards net short cover.
| 07-Oct-25 | 06-Oct-25 | Daily OI Change | OI DV01 Equivalent Change ($) |
TU | 4,617,546 | 4,590,741 | +26,805 | +1,053,344 |
FV | 6,721,536 | 6,714,305 | +7,231 | +316,306 |
TY | 5,393,967 | 5,429,056 | -35,089 | -2,363,707 |
UXY | 2,460,836 | 2,462,153 | -1,317 | -119,098 |
US | 1,881,110 | 1,887,029 | -5,919 | -841,244 |
WN | 2,054,464 | 2,052,350 | +2,114 | +395,110 |
|
| Total | -6,175 | -1,559,289 |
BONDS: Japanese Investors Net Sold OATs and BTPs In August
Japanese investors were net sellers of French and Italian bonds in August, according to balance of payments data released overnight. While there is no detail on the timing of flows in the data, it’s reasonable to assume that ex-French PM Bayrou’s no-confidence vote announcement on August 25th prompted a degree of selling in French paper.
- Investors net sold JPY67.7bln of French bonds in August, the first month of net sales since March. Year-to-date, net purchases have still totalled JPY917bln, but net flows since Macron’s snap legislative election announcement in Q2 2024 remain clearly negative.
- Investors sold JPY123bln if Italian bonds in August, the third consecutive month of net sales.
- Net purchases of German and UK bonds remained positive in Augst.
- Investors net sold JPY214bln of US Treasuries, but this followed a sizeable JPY2.59trln net inflow in July.
