CZK: EURCZK Rally Persists Amid More Dovish CNB Rate Pricing

FI desks reported mixed SOFR & Treasury options overnight - leaning towards puts ahead of Wed's FOMC policy annc, anticipating a hawkish cut. Underlying futures moderately lower, curves flatter (2s10s -0.714 at 56.555, 5s30s -1.525 at 106.249). Projected rate cut pricing large steady vs late Friday levels (*): Dec'25 at -24.9bp (-23.8bp), Jan'26 steady at -31.0bp, Mar'26 steady at -38.7bp, Apr'26 steady at -45bp.

• SOFR Options:
  • +2,000 SFR5 96.18 puts, 1.0
  • 2,000 SFRZ6 96.31/96.43/96.56 call flys ref 96.265
  • 14,000 SFRZ6 96.87/97.37 call spds 0.5 over 96.50 puts
  • 1,100 SFRG6 96.25/96.37/96.43/96.50 broken put condors
  • 6,700 SFRZ5 96.50/96.87/97.37 broken call trees ref 96.83
  • +3,000 SFRZ5 96.18/96.25/96.31 put flys, 2.5 ref 99.265
  • Block, +4,300 SFRH6 96.18/96.43/96.56 broken put flys, 0.0 ref 96.43
  • -5,250 SFRZ5 96.31/96.37 call spds, 0.25 net ref 96.265
  • Blocks +6,000 0QH6 96.12/96.25/96.37 put flys, 0.5
  • +3,370 SFRZ6 99.00/100/101 call flys, 2 vs. 96.89/0.05%
  • 1,785 SFRZ5 96.31/96.37 call spds ref 96.265
  • 1,350 0QZ5 96.62/96.87/97.00/97.12 broken put condors ref 96.835
  • -10,000 0QF6 96.93/97.06 call spds, 3 ref 96.85
• Treasury Options:
  • 4,400 FVF6 108.5/110.25 strangle vs. FVG6 108.25/110.25 strangle
  • over 4,000 TYH6 110 puts, 14
  • 2,000 TYF6 110/111.5 put spds ref 112-13
  • 2,000 TYF6 110.5/112 put spds ref 112-13
  • over 39,800 TYF6 112 puts, 17-20
  • 5,650 TUH6 104 puts, 9
  • 1,500 TYF6 113 straddles
  • +2,000 TYF6 112/113 2x5 call spds 10
  • +4,000 TYF6 111.5 puts, 9 vs. 112-16/0.18%, total volume over 10k
  • +1,500 TYH6 113.5 calls vs. TYG6 114 calls, 20 net (Mar over)
  • -20,000 TYF6 112/112.5 put spds vs. 114.5 calls, 11 net ref 112-15
  • +1,600 FVF6 108.25/108.75 put spds, 6.5 vs. 109-06.25
  • +5,000 TYF6 111.25/112.25 put spds vs. 113.5/114.5 call spds 12 net ref 112-115
  • over 7,100 wk2 TY 112.5 puts, 14 exp Fri
  • +2,130 TYH6 110/111/112 put flys, 9 ref 112-18

• USDCAD has printed 1.3800 in recent trade, moderately extending the impressive move lower following Friday's employment report. Despite the recent breakout, Scotiabank and JPM have differing views over the devlopments for the Canadian dollar.
• While Scotiabank acknowledge the latest employment data was not entirely positive; they believe the latest trends point to a significant narrative shift for the CAD after a prolonged period of tariff-driven doldrums. Consequently, Scotia highlight that markets have moved quickly to price in the start of the BoC tightening cycle late next year, which has been Scotia’s base case view for some time.
• Scotia point out that USDCAD is trading very close to their fair value estimate (1.3801) today and expect the CAD to remain well-supported on minor dips.
• Meanwhile, JP Morgan highlight that their desk saw significant CAD demand from real money, hedge funds, and systematic accounts, with Friday’s move seeing decent follow through given CAD shorts remain a widely held position.
• However, JPM are not turning bullish at this stage and instead plan to use this move as an opportunity to buy USDCAD topside into next year, which they will continue to use as a funder to EM FX longs.

• -1,800 WNH6 118-14, sell through 118-15 post time bid at 0759:39ET, DV01 $333,800.
• The 30Y ultra contract trades 118-18 last (-3).