EMISSIONS: EUAs/UKAs Hit Record Highs

Merz so far mostly talking about the Ukraine conflict and Germany's role in Europe in his government declaration.

• Assured a more active German role bringing forward common European goals, and mentioned he will make every effort to "achieve the greatest possible unity" between European and American partners. He announced a new voluntary military service - so far nothing unexpected.
• More concrete measures, especially on domestic economic policy, likely to come - for details, see 'GERMANY: Merz To Hold First Government Declaration at 12:00 BST / 13:00 CEST' - 10:35 GMT.

Overnight SOFR options leaned toward downside put structures on lighter volumes, Treasury options more paired as underlying futures scale off late overnight highs. Projected rate cut pricing holds steady to mildly softer vs. late Tuesday levels (*) as follows: Jun'25 steady at -2.1bp, Jul'25 steady at -9.8bp, Sep'25 steady at -24.7bp, Oct'25 steady at -37.3bp, Dec'25 at -52.9bp.

• SOFR Options:
  • -4,000 SFRZ5 95.75/96.00 put spds, 9
  • 3,000 SFRV5 95.62/95.81/95.87 put trees ref 96.205
  • Block, 2,500 SFRM5 95.75/95.81/95.93/96.00 put condors, 0.25 ref 95.705
  • -4,000 SFRU5 96.25/96.75 call spds, 4.5 ref 95.94
  • 4,000 OQK5 96.62/96.87 2x1 put spds ref 96.53
• Treasury Options:
  • +1,000 TYM5 110.25/110.75/111.25 2x3x1 call flys, 16
  • -2,000 TYM5 110.25 straddles, 53
  • -7,500 TYM5 109.5 puts, 11
  • 4,200 FVM5 108.75 calls, 2 last
  • 3,200 FVM5 107.5 puts, 18 last
  • -1,250 FVM5 107.5/107.75/108.25 broken put flys, 15 vs. 107-19.5/0.05%
  • +1,000 FVM5 108.25/108.75 call spds, 3.5

Modest downticks in core global FI markets as NASDAQ 100 e-minis hit fresh session highs.

• A downtick in oil has provided some insulation from the uptick in equities seen over the last ~90 minutes, helping core global FI markets to hold away from worst levels of the session.