US TSYS: Late SOFR/Treasury Option Roundup
Friday's option volume well off pace for the week, lost opportunity for sidelined accounts ahead the weekend and next week's FOMC as underlying futures in the short end surged higher later in the second half. Headline risk tied to banks rekindled implied rate cut expectations by midyear again. Implied cut for Jul'23 at -26.3bp to 4.318%, Sep'23 cumulative of -44.5 to 4.323%; peak Fed terminal rate has fallen to 4.795% for May'23 vs. 4.920% earlier. Highlight trade includes:
- SOFR Options:
- Block, 9,000 SFRM4 93.50 puts, 6.5 ref 96.68
- Block, +5,000 SFRZ3 96.06 straddles, 160.0 ref 96.07
- Block, 7,500 SFRM3 94.50/94.75 put spds, 7.0 ref 95.45
- +10,000 SFRJ3 94.50/95.00 put spds, 12.25 ref 95.355
- Block, +10,000 SFRM3 96.00/97.00 call spds 13.5 ref 95.31 to -.315
- +5,000 SFRJ3/SFRM3 95.00 put spds, 7.0 still bid
- Treasury Options:
- over 15,000 FVJ3 108/108.5 put spds, 3.5-5.0 ref 109-29
- over 4,500 USJ3 127 puts, 3
- over 9,900 TYJ3 115 calls, 36 last ref 114-22.5 to -24.5
- 10,000 TYK3 115/116 call spds vs. TYK3 105/108/109.5/111 broken put condor
- 5,000 TYM3 120/125/130 call flys, ref 114-12
- 1,000 FVK 110.5/111.5 4x5 call spds ref 109-01.75
- 2,000 FVK 112/113 call spds ref 109-04.5
- 4,100 FVJ3 109.5 calls, 21 ref 109-00.25
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US: CBO Warns Treasury Risks Payment Default As Soon As July
- The CBO estimate the US Treasury risks a payment default as soon as July, citing a window between July-September.
- Bloomberg note that “The estimate suggests that lawmakers could have slightly more leeway than Treasury Secretary Janet L. Yellen estimated last month, when she told Congress that her department’s ability to keep financing America’s obligations could be exhausted in June.”
- Revised forecasts see higher PCE inflation and lower GDP growth compared with last estimates from May’22: PCE see 3.3% Y/Y for 4Q23 (2.3% prior) and GDP seen at just 0.1% Y/Y (2.2% prior).
- It sees a budget deficit at 5.3% GDP in FY23 before widening to 6.1% in both FY24 and FY25, with debt-to-GDP projected at a record 118% GDP in 2033.
EURGBP TECHS: CPI Bump Higher
- RES 4: 0.9097 76.4% Retracement of the Sep 26 - Dec 1 bear leg
- RES 3: 0.9047 2.0% 10-dma envelope
- RES 2: 0.8992 61.8% Retracement of the Sep 26 - Dec 1 bear leg
- RES 1: 0.8911/8979 High Feb 7 / 3 and the bull trigger
- PRICE: 0.8893 @ 15:49 GMT Feb 15
- SUP 1: 0.8804 Low Feb 14
- SUP 2: 0.8798 50-day EMA
- SUP 3: 0.8762 Low Jan 30
- SUP 4: 0.8722 Low Jan 19 and a reversal trigger
EURGBP trend conditions remain bullish, with prices reverting higher on the back of the UK CPI release. Recent clearance of 0.8897, the Jan 13 high, confirmed a resumption of the uptrend that started early December and sights are on 0.8992, a Fibonacci retracement. Moving average studies remain in a bull-mode position, highlighting an uptrend. First support to watch lies at 0.8798, the 50-day EMA.
PIPELINE: $5B MUFG 5Pt Launched
Total high-grade issuance at $30B on the day
- Date $MM Issuer (Priced *, Launch #)
- 02/15 $24B #Amgen $2B 2Y +65, $1.5B 3NC1 +115, $3.75B 5Y +115, $2.75B 7Y +135, $4.25B 10Y +150, $2.75B 20Y +165, $4.25B 30Y +185, $2.75B 40Y +200
- 02/15 $5B #MUFG $1.65B 3NC2 +108, $600M 3NC2 SOFR+94, $1B 6NC5 +138, $500M 8NC7 +153, $1.25B 11NC10 +163
- 02/15 $1B #Gov of Sharjah +9Y +280
