US TSYS: Late SOFR/Treasury Option Roundup
Jun-06 19:18
With a few exceptions, Friday's SOFR & Treasury option trade focused on upside call buying - looking for a rebound in the late week FI selling, and vol structure selling. Some large put spread buying was reported in SOFR year end options, however, as projected rate cut pricing continued to consolidate vs. morning levels (*) as follows: Jun'25 at 0.0bp (-0.6bp), Jul'25 at -4.1bp (-8.4bp), Sep'25 at -17.9bp (-24.5bp), Oct'25 at -29.6bp (-37.9bp), Dec'25 at -44.3bp (-54.6bp).
- SOFR Options:
- +47,000 SFRZ5 95.37/95.62 put spds, 1.50-1.75 ref 96.09
- +30,000 SFRU5 95.93 calls, 10.5 vs. 95.855/0.25%
- Block, 8,000 0QM5 96.37/96.50 put spds, 6.5vs. 96.44/0.32%
- +20,000 SFRU5 95.50/95.75/96.00 puyt fly vs. 95.68/95.93/96.18 put fly spd, 7.75-8.0
- Block, 5,000 SFRH6 96.00 puts, 16.5 vs. 96.31/0.30%
- +10,000 SFRU5 96.75/97.50 call spds, 1.5 ref 95.86
- +10,000 SFRV5 95.75/95.87/96.00 put flys, 1.75 ref 96.11
- +10,000 SFRH6 98.00/99.00 2x3 call spds 5.5
- +5,000 SFRN5/SFRQ5/SFRU5 95.75/95.93/96.00/96.18 call condor strip, 13.0 red 95.865
- Update, +35,000 SFRH6/SFRM6 98.62 call strip, 6.0
- Block, 5,000 SFRZ5 95.43/95.56/95.62/95.75 put condors, 2.5 vs. 96.13/0.04%
- Block: +7,000 SFRZ5/SFRH6 95.68/95.87 put spd spd, 2.0 net/Dec over
- Block/total, -18,500 SFRU5 95.25/95.75 put spds, 5.5
- Block, -8,500 SFRU5 95.25/95.75 put spds, 5.5 ref 95.86
- +2,000 2QU5 96.50 straddles, 45.5
- -5,000 SFRU5 96.00 calls, 9.0 ref 95.86
- +10,000 SFRZ5 95.62/95.87/96.12/96.37 call condors 6.0 over 96.25/96.50/96.75/97.00 call condor roll-down
- -1,500 0QM5 96.50 straddles, 12.5
- -5,000 SFRU5 96.00 calls, 9.5 rtef 95.86
- -5,000 0QN5 96.68 puts, 17.5
- -2,500 SFRZ5 96.25/96.43 call spds, 5.0 ref 96.135
- -4,000 0QM5 96.50 calls, 7.5 ref 96.52
- -5,000 SFRV5 97.00/98.00 call spds 3.75-4.0
- +4,000 0QM5 96.43/96.50 put spds, 2.0 ref 96.59
- -3,000 SFRN5/SFRQ5 96.25 call strip vs. 0QN5/0QQ5 97.25 call strip, 0.0
- +2,000 0QN5 96.37/96.50/96.62 put flys, 2.0 ref 96.68
- 4,500 SFRN5 96.25/0QN5 97.25 call spds
- +2,000 SFRZ5 96.50/97.00 call spds, 8.5 ref 96.21
- Treasury Options:
- -10,000 TYN5/TYU5 109.5 put calendar spread, 47 net/Sep over
- 2,000 FVN5 108.75/109.25/109.75 call flys
- 8,800 TUN5/TUQ5 104 call spds, 5
- 5,750 FVN5 108.25/109 call spds, .5 ref 107-21
- over 5,000 TYN5 110.25 straddles
- +8,000 TYN5 109.5 puts, 15
- -15,000 USN5 115 calls, 15
- over 9,600 TUN5 104 calls, 2 ref 103-17.5 to -17.88
- 2,300 TYN5 110.75 calls, 20 ref 110-11.5
- 2,200 wk1 TY 110.75/111/111.25 put trees (exp today)
- over +/-12,400 TYN5 112 calls, 11-10
- +4,000 wk1 Fri FV 108.75 calls, 2 (exp today)
- +2,500 FVU5 109/111/113 call flys, 17
- 2,000 FVN5 106.5/107/108 2x3x1 broken put flys
- 2,000 wk2 FV 108 puts, 13.5
- 1,500 TYN5 108.5/109.5 put spds ref 110-27
- 1,900 TUN5 103.88 calls
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Historical bullets
FED: Powell on the Net Trade Drag
May-07 19:17
- Q: The volume of imported goods increased significantly in the first quarter. Do you think the decision could cause a delay in the impact of tariff on inflation and does this mean that it will take longer time to reduce uncertainty?
- A: On the net trade drag, it could in Q2 be reversed so that we have an unusually large contribution, unusually positive. That's very likely as imports drop sharply. It’s also very likely you will have revisions to Q1, it will turn out that consumer spending was higher, inventories were higher and so you will see those data revised up. It may actually go into the third quarter, too. This whole process is going to, a little bit, make it harder to make a clean assessment of U.S. demand. I mentioned private domestic final purchases which doesn't have inventories, government. It's a cleaner read on private demand but that, too, probably was flattered a little bit by strong demand for imports to beat tariffs.
- I don't think it's going to affect our decisions. It's a little confusing and it's probably less confusing to us than it would be to the general public as we try to explain this. It's complicated and GDP is sending a signal, PDFP is sending a signal. It's a little bit confusing but I think we understand what's going on and it's not really going to change things for us.
FED: Powell Emphasises Wait-and-See Approach
May-07 19:12
- Q: In terms of getting some clarity we have got some talks that we can in Geneva between the U.S. and China, a lot of economists are attaching a lot of importance to what we hear from those talks. How much importance are you attaching to them in terms of judging what will happen to the U.S. economy going forward?
- A: These are not talks that we are in any way involved in so I really can't comment directly on them. What I will say is this: coming out of the March meeting, we, the public generally had an assessment of where tariffs were going. And then April 2 happened and it was really substantially larger than anticipated in the forecasts that I had seen and in our forecasts. It seems to be we are entering a new phase where the administration is entering into beginning talks with a number of our important trading partners and that has the potential to change the picture materially or not.
- And so I think it's going to be very important how that shakes out. But we simply have to wait and see how it works out. It certainly could change the picture and we are mindful of not trying to make conclusive judgments about what will happen at a time when the facts are changing.
FED: Powell Doesn't Specify on Unemployment Rate Rise That Could be Tolerated
May-07 19:11
- Q: Congress is extending the tax cuts and I know you have talked many times about how the debt path is unsustainable but given that we are also talking right now about the economy slowing, potentially even recession, is there a danger that spending cuts now could slow growth a lot more?
- A: I don’t think they need our advice on fiscal policy any more than we need their advice on monetary policy.
- Q: In your Jackson Hole comments last year, you said you would not welcome further cooling in labor market conditions, the unemployment rate then was 4.2%, which is what it is now, forecasters, many forecasters now predict a higher jobless rate. How has your tolerance for weakening labor market conditions changed compared to a year ago?
- A: It was quite a different situation. What was happening last year is that over the space of six, eight, seven months, the unemployment rate went up by almost a full percentage point. At the same time, payroll job numbers were getting softer and softer so there was really obvious concern about downside risk to the labor market. And so at Jackson Hole and then in September, we wanted to address that forthrightly - it was important that we send that signal. Fortunately, since then, the unemployment rate has really been moving sideways at a level that is well in the range of mainstream estimates of maximum employment so that concern has gotten a lot less.
- Q: How much of a rise in the u/e rate could you tolerate?
- A: I won’t give a specific answer. We have to now be looking at both variables and which of them is demanding, if one of them is demanding our focus more than the other, that would tell us what to do with policy. If they are more or less equally distant and equally or not distant, then we don't have to make that assessment. The assessment is you wait.
