US NATGAS: Dominion South Price Largely Stable

Relatively mixed SOFR & Treasury option trade overnight, modest volumes with pick up in downside put flow after Friday's better call volume. Underlying futures mostly higher/paring gains: SOFR trades firmer, Bonds weaker at the moment. Projected rate cut pricing gains slightly in Oct & Dec vs. late Friday levels (*) as follows: Jun'25 steady at 0.0bp, Jul'25 steady at -4.1bp, Sep'25 steady at -17.9bp, Oct'25 at -30.6bp (-29.6bp), Dec'25 at -45.9bp (-44.3bp).

• SOFR Options:
  • Block, 4,800 SFRU5 95.75/95.87 put spds 8.0 ref 95.87
  • 9,000 SFRU5 95.81/95.93 call spds ref 95.865
  • 2,500 0QV5 96.00/96.25 put spds ref 96.61
  • 2,000 SFRZ5 96.25/96.50 call spds
  • 5,000 SFRZ5 96.25/96.37/96.50/96.62 call condors ref 96.11
  • 1,000 SFRU5 95.68/95.87/96.00 broken put flys ref 95.865
  • 1,000 0QM5 96.37/96.50/96.75/97.00 broken call condors ref 96.475
  • +5,000 0QM5 96.43/96.56/96.68 1x3x2 call flys 1.5 vs. 96.425/0.05%
• Treasury Options:
  • 1,250 TUQ5 103.75/104 2x3 call spds vs. 2,500 TUQ5 103.12 puts ref 103-15.88
  • 3,000 TYN5 109 puts, 8 ref 110-04
  • 4,500 Wed wkly TY 109.25/109.75 put spds ref 110-02.5 (exp 6/11)
  • +3,000 FVQ5 107.75/108.75 1x2 call spds 4.5 ref 107-21
  • Block, -10,000 FVN5 107 puts, 6 ref 107-19.5

See here for a comprehensive summary of ECB speak since the June decision: 250609 - Weekly ECB Speak Wrap.pdf

There has been a familiar wave of ECB Governing Council speakers and source reports since last Thursday’s decision. While rates were cut by 25bps as expected, the tone of President Lagarde’s press conference was more hawkish than expected. Lagarde noted policy is well positioned and that “we are getting to the end of a monetary policy cycle that was responding to compounded shocks.” . Speakers since Thursday have largely echoed this stance, albeit with some nuances of opinion with respect to future cuts.

The MNI Policy Team’s latest sources piece wrote that the ECB is likely to pause its easing cycle in July, with policymakers pointing to the expiration of the reprieve on U.S. tariffs on July 9 as pivotal for determining their next moves in 2025. However, one more 25-basis-point cut in either September or December is the base-case scenario, Eurosystem sources told MNI. This is largely consistent with market pricing, with ECB-dated OIS pricing 3bps of easing through July and 26bps through year-end.

The pullback in major EGB futures has gathered pace over the last ~30 minutes, with NY desks potentially opting to fade this morning’s rally. Bund futures are +9 ticks at 130.46, with early BTP outperformance also fading (+9 ticks at 120.72).

• Both Bund and BTP futures pierced initial resistance levels this morning, but were unable to meaningfully extend to the topside.
• Meanwhile, the 2021 low (~90.4bps) contained downside in the 10-year BTP/Bund spread.
• These technical rejections alongside an intraday move higher for oil prices have likely contributed to the retracement in futures.
• Market moving regional headline flow has been fairly limited through the European session so far. A reminder that the Whit Monday holiday may be limiting broader activity.
• A Reuters source report noting the Japanese government is considering buybacks of some super-long JGBs lent light support to JGB futures earlier, but that move has also faded.