EU CREDIT UPDATE: CREDIT UPDATE: EUR Market Wrap

Slow start to the new week, muted Treasury and SOFR option volume, underlying futures extending modestly lower at the bell. Projected rate cut pricing are largely steady vs. late Friday levels (*): July'24 at -10% w/ cumulative at -2.5bp at 5.302%, Sep'24 cumulative -18.4bp (-17.6bp), Nov'24 cumulative -27.1bp (-26.6bp), Dec'24 -46.8bp (-46.7bp). This morning's salient flow includes:

• SOFR Options:
  • 2,500 SFRU4 94.87/95.00 call spds ref 94.855
  • 7,500 SFRU4 94.87 calls, 6.5-7.0
• Treasury Options:
  • 4,000 TYQ4 109.5/110.5/111.5 call flys, ref 110-12
  • -1,500 wk4 TY 110.5/111 call spds 7 vs. 110-14.5
  • 1,100 TUQ4 102.12/102.38/102.62 call trees, ref 102-05.88
  • 1,200 wk4 TY 111/111.5 1x2 call spds
• Compares to Friday's heavy upside call buying: carry-over buying +80,000 Aug'24 10Y 111.5 calls Friday, strike corresponds to 4.1% yield vs. 4.2671% currently. Open interest rises by 53,082 to 123,464 Friday, after +70k late Thursday at 27 vs. 110-14/0.31%. SOFR call buying picked up with buyer of over 86,000 Mar'25 96.75/97.75 call spds at 4.75, open interest in the two strikes climbs 59,482 and 81,367 respectively.

• The House of Representatives returns tomorrow to continue work on three Fiscal Year 2025 appropriations bills: Defence, Homeland Security, and State-Foreign Operations.
• Treasury Secretary Janet Yellen will say in Minneapolis, Minnesota today she expects shelter inflation "will moderate" and call on Congress to act on a plan to, "help more than 3.5 million families purchase their first home in the next two years."
• Moody’s Analytics’ chief economist Mark Zandi warned of an imminent recession in a social media post urging the Federal Reserve to cut interest rates.
• The Supreme Court is preparing a blockbuster week of decisions, including whether former President Donald Trump should be immune from prosecution for acts committed whilst he occupied the Oval Office.
• Senator JD Vance (R-OH) and Governor Doug Burgum (R-ND) are firming as the favourites for Trump’s Vice President.
• Senior officials from the US, Republic of Korea, and Japan have condemned deepening military cooperation between North Korea and Russia.
• Israel’s Defence Minister Yoav Gallant is in Washington this week for meetings with US officials on the next phase of the Gaza war and escalating tensions on the border with Lebanon. Gallant likely also has a secondary task: Repair a rift between the Biden administration and Israeli Prime Minister Benjamin Netanyahu.
• Poll of the Day: Democratic Senate candidates continue to outperform President Biden in key swing states, suggesting that the Democrat brand remains strong despite a lack of enthusiasm for Biden.