US TSY OPTIONS: Jul'25/Sep'25 10Y Put Calendar Spread

• ABN AMRO says that today’s measures were in line with their expectation of additional monetary easing in the form of policy rate and RRR cuts, combined with the further stepping up of fiscal support. They expect cuts in other policy rates, such as the loan prime rates, and the 1-year medium-term lending facility rate, to follow soon.
• ANZ believes that the timing of the announcement offers a policy buffer for Chinese exporters before the trade talk between US and Chinese officials in Switzerland this week. The authorities are prepared to have a protracted negotiation and hold a strong stance against protectionism. Given the extent of policy easing, the onshore interest rate will drop further in May. Banks will receive a large injection ahead of summer when many college graduates enter the job market. The overnight repo will likely be guided to below 1.5%.
• DBS says that the new set of policies sends a positive signal to the market. Offshore CNH once hit 7.19 on an intra-day basis. Onshore 2Y CGB yields edge down from 1.48% to 1.46%, while 10Y yields remain steady at around 1.63%. Looking ahead, the benchmark rate cut will likely keep short-end CGB yields in-check. Long-end rate will remain stable amid a more optimistic growth outlook, better asset market performance and accelerating bond issuance. The upshot is that curve will likely steepen.
• Nomura does not believe these monetary and financial policies on their own are sufficient to address the double whammy faced by the economy. A slump in exports appears inevitable, while the property sector is still declining at a worrying pace. To cope with these unprecedented challenges, Nomura believes Beijing needs to take bolder moves, especially on the fiscal front. They maintain their forecast for another 50bp RRR and a 15bp policy rate cut in Q4.

Likely Fed URLs based on previous meetings (they will only go live at 1400ET):

• Statement: https://www.federalreserve.gov/newsevents/pressreleases/monetary20250507a.htm
• Implementation note: https://www.federalreserve.gov/newsevents/pressreleases/monetary20250507a1.htm
• Press Conference (for 1430ET): https://www.federalreserve.gov/monetarypolicy/fomcpresconf20250507.htm

• 6,000 SFRU5 95.81/SFRZ5 95.68 put spds, 1.0 net/Sep over at 1346:47ET