EURIBOR: EURIBOR FIX

• RES 4: 1.3716 High Jun 26 2020
• RES 3: 1.3702 2.382 proj of the Aug 25 - Sep 7 - 13 price swing
• RES 2: 1.3651 61.8% retracement of the 2020 - 2021 bear leg
• RES 1: 1.3582 2.00 proj of the Aug 25 - Sep 7 - 13 price swing
• PRICE: 1.3561 @ 15:32 BST Sep 23
• SUP 1: 1.3358 Low Sep 21
• SUP 2: 1.3194 20-day EMA
• SUP 3: 1.3058 50-day EMA
• SUP 4: 1.2954 Low Sep 13

USDCAD maintains a clear bullish tone and the pair traded higher again Friday. The extension reinforces bullish conditions and maintains the positive price sequence of higher highs and higher lows. Moving average studies are in a bull mode position, highlighting current market sentiment. Sights are set on 1.3582 next, a Fibonacci projection. On the downside, initial firm support is at 1.3194, the 20-day EMA.

Well off late overnight lows when 2YY made new 15Y high of 4.2657%, FI markets finishing mixed, curves unwinding a large portion of Thu's steepening with bonds trading higher through the second half, 2s10s currently -10.559 at -51.613.

• Tsy dipped briefly after better than exp S&P US Sep Flash Mfg PMI: 51.8 vs. 51.0 est, much better than expected services (49.2 vs. 45.5 est) and comp (49.3 vs. 46.1) still contractionary (below 50).
• Otherwise, Tsys and EGBs tracked Gilts amid heavy selling in short end to intermediates after fiscal event concluded by Chancellor Kwasi Kwarteng in the House of Commons earlier. Event marked largest shift in the policy stance of the Conservative party in a generation. Bloomberg reports that the cost of the package will be GBP161bn over five years.
• In the aftermath of Wed's 75bp Fed and Thu's 50bp BoE hikes, debate over how much hawkish forward guidance to price in continues. Many US and London banks adjusting rate hike expectations to 75bp again in respective November policy meetings.
• Meanwhile, persistent rally in USD Index has extended through the London close, with the greenback hitting new cycle highs of 112.866. Move exacerbated by protracted weakness in GBP (making up around 12% of the USD Index) following the UK mini budget earlier today.
• Cross asset roundup: stocks making a move off late session lows, Energy sector underperforming (SPX -77 at 3695.0) crude sharply lower (WTI -4.67 at 78.82), as is Gold -28.64 at 1642.58.

Much better option volumes Friday as underlying rates extended the week's lows (2YY tapped 4.2657% high) as markets continued to price in more rate hikes into year end. That said, option desks reported surge in upside call and call spread buying in 5- and 10Y Tsys options fading the sell-off as too far to fast. Salient trade:

• SOFR Options:
  • Block, 20,000 SFRZ2 96.00/96.25 call spds, 2.5 ref 95.625
  • Block, 35,000 short Oct 95.75 puts, 24.0 vs 95.62/0.64% more on screen
  • +15,000 short Mar 98.00/98.50 call spds, 1.25
  • Block/screen 10,000 SFRZ2 96.00/96.25 call spds, 2.0
• Eurodollar Options:
  • 10,000 Mar 95.00/95.50 2x1 put spds
  • 15,000 Sep 95.00 puts vs. 12,000 Mar 95.75 puts
• Treasury Options:
  • +10,000 TYX 114 calls, 40 - adds to +9k from 26-27 earlier
  • +5,000 TYZ 117.5 calls, 16 ref 112-16.5
  • +5,000 TYZ 118 calls, 13 ref 112-17.5
  • +5,000 TYZ 120 calls, 6 ref 112-16
  • +12,500 TUX2 103.75/104.37 call spds, 2 ref 102-23