EURIBOR OPTIONS: ERM6 98.25/98.37 Call Spread Lifted

The DMO has announced it will be looking to sell GBP3bln of the 4.375% Jan-40 Gilt (ISIN: GB00BQC82D08) at its auction next Tuesday, September 16.

• SOFR futures have on net seen a slightly surprising hawkish reaction to the preliminary estimate for annual benchmark revisions, as detailed above.
• Reaction seems to have put more weight on the -919k estimate being within wide ranges of estimates rather than the fact it was more negative than a crude median of around -750k.
• 2026 and 2027 contracts now sit 1-2 ticks lower since the release, more than reversing a jump on the headlines.
• It leaves the day’s SOFR losses led by mid-2026 contracts with -4 ticks.
• The SOFR implied terminal yield of 2.865% (SFRH7) is 2.5bp higher on the day after yesterday’s new lowest close since Sep 2024 having come close to cycle lows in the high 2.7s, highly the extent of recent dovish pricing.
• As for nearer-term Fed pricing, Fed Funds futures point to cumulative cuts from 4.33% effective of 27bp Sep 17, 47bp Oct, 69.5bp Dec, 82.5bp Jan and 97.5bp Mar. 

• -10,000 SFRH6 96.62, post time bid at 1010:58ET
• The Mar'26 contract trades 96.62 last (-0.030)