PERU: Copper Transport Resuming As Protestors Set To Hold Talks

US:

• SPX: 73%.
• NDX: 72%.
• DOW: 73%.

EU:

• Estoxx: 70%.
• EU Bank: 70%.
• Stoxx600: 89%.
• DAX: 61%.
• FTSE: 81%.

Natixis recommend a German 2/10-Year swap spread box compression trade, looking for a move to -15bp, with a stop set at 0bp.

• They believe that “geopolitical risk has been supporting the widening trend of the Bund swap spread, offering us a chance to fade the move”.
• They see “limited ripple effects from the conflict between Israel and Iran on the long end of swap spread curve. As the 10-Year swap spread gets closer to 0, reallocation flows from U.S. Treasuries to the Bund curve should slowly deter price sensitive investors”.

SOFR & Treasury option flow continued to revolve around upside calls outright and on spread. Moderate volumes ahead a busy day: house starts/permits, weekly claims (holiday tomorrow) ahead of the FOMC annc this afternoon, TIC flows later. Ongoing Middle East tensions and potential for US to join the fray keeping implied vol anchored. Underlying futures mildly higher, curves flatter while projected rate cut pricing largely steady vs. late Tuesday levels (*) as follows: Jun'25 steady at 0.0bp, Jul'25 steady at -3.6bp, Sep'25 at -17.7bp (-17.7bp), Oct'25 at -29.1bp (-29.6bp), Dec'25 at -45.1bp (-45.2bp).

• SOFR Options:
  • 2,000 SFRV5 96.18/96.43 call spds ref 96.09
  • 2,800 SFRU5 95.93/96.00/96.06 call flys
  • +3,000 SFRU5 95.56/95.62/95.68 put flys, 1.25 ref 95.86
  • +12,800 SFRH6 96.50/97.00/98.00 broken call flys, 2.5 ref 96.32 to -.33
  • 1,600 3QZ5 96.25/96.62/97.00 call flys, 8.0
• Treasury Options: (July serial options expire Friday)
  • +5,000 TYQ5 110.5/111.5/112 1x3x2 call flys 4 over TYQ5 112/113/113.5 1x3x2 call flys
  • +2,000 TYQ5 114.5 calls, 8
  • -3,000 TYN5 110.75 calls, 16 vs 110-22.5/0.50%
  • +3,000 TYN5 111.5 calls, 6
  • +1,500 Wed wkly TY 110.75/111/111.25 call flys, 3.0
  • +6,500 Wed wkly FV 107.5/107.75 put spds, 1 (exp today)
  • +2,000 TYN5 110.5/111/111.5 call flys, 8