US TSYS: Late SOFR/Treasury Option Roundup

Better SOFR/Treasury call volumes on net Wednesday, some notable put spreads as well (+60k SFRZ5 96.06/96.12 put spd). Underlying futures climbing again after paring back from late morning highs. Projected rate cut pricing gaining vs. late Tuesday levels (*): Oct'25 at -25.3bp (-24.2bp), Dec'25 at -46.9bp (-44.2bp), Jan'26 at -58.8bp (-53.7bp), Mar'26 at -70.0bp (-64.7bp).

• SOFR Options:
  • Block, 8,000 0QZ5 97.12/97.50 call spds vs. 3QZ5 96.87/97.25 call spd, 1.5 net - conditional curve steepener
  • Block, 2,500 0QZ5 97.00/97.25 2x5 call spds, 3.5 net
  • +10,000 0QZ5 96.25/96.56 2x1 put spds, 1.0 ref 96.955
  • -6,000 0QZ5 96.37/96.62 2x1 put spds, 1.0 ref 96.955
  • Block, 5,000 SFRZ5 96.56/96.68 call spds, 1.25 ref 96.355
  • 3,000 SFRZ5 96.25/96.31/96.50/96.56 call condors
  • 5,000 SFRH6 96.37/96.50 2x1 put spds ref 96.56
  • over 7,400 SFRV5 96.43 calls, ref 96.355
  • -7,000 SFRZ5 95.93/96.06/96.18/96.31 call condors, 3.25
  • Block, 6,250 SFRZ5 96.50 calls, 3.75 ref 96.36
  • over +59,000 SFRZ5 96.06/96.12 put spds, 0.75 ref 96.32/0.05%
  • 3,800 SFRG6 96.75 calls ref 96.515
  • +2,500 0QX5 96.75 puts, 5.0 vs. 96.92/0.29%
  • +1,500 SFRZ5 96.25/96.37/96.50 call flys, 4.75 vs. 96.33/0.08%
  • -1,500 0QZ5 96.87 straddles, 30.5
  • +2,000 SFRZ5 96.25/96.31/96.50/96.56 call condors, 3.5 vs. 96.325/0.07%
  • 5,200 SFRH6 96.12/96.25/96.50/96.75 call condors
• Treasury Options:
  • 6,500 TUZ5 103.87/104.37/104.50/104.87 broken put flys ref 104-09.62
  • 5,700 TYX5 112.5/TYZ5 112 put spds
  • 2,500 TUX5 103.87/104.12 put spd vs. 104.5 calls ref 104-08.75
  • 1,400 TYZ5 113 straddles, 1-47 ref 112-21
  • 2,500 TYX5 112.75 straddles, 1-07 ref 112-21.5
  • 1,200 FVZ5 109.25 straddles, 1-19 ref 109-11.5
  • over 11,900 FVX5 109 puts, 12.5 ref 112-26
  • 10,000 Wed wkly TU 104.37 calls, .5 (exp today)
  • over 5,000 TYZ5 113/113.5/114 call trees (total volumes: 113 call over 9.3k, 114 call over 13.7k. Note: yesterday's continuation of low delta call buying: over 186k TYZ5 113 calls, OI +133,664; over 65.3k TYZ5 113.5 calls, OI +22,147; over 108k TYZ5 114 calls, OI +20,739)
  • +2,000 TYX5 114/TYZ 114.5 call diagonal, 9 net/Dec over
  • 2,000 TYX 114/114.5 call spds ref 112-20
  • 5,500 FVX5 109.75 calls, 11 ref 109-07.25
  • 5,500 TYX5 113 calls, 24 ref 112-16
  • +1,500 TYZ5 113/114/115 call flys, 8 vs. 112-10/0.05%
  • -2,000 FVX5 108/109 put spds, 14.5 vs. 109-08.25/0.08%
  • 2,500 Wed wkly 112.75 calls, 2 ref 112-16 (expire today)

• RES 4: 177.08 2.000 proj of the Feb 28 - Mar 18 - Apr 7 price swing 
• RES 3: 176.00 Round number resistance 
• RES 2: 175.43 High Jul 11 ‘24 and a key medium-term resistance
• RES 1: 175.13 High Sep 29    
• PRICE: 172.60 @ 16:30 BST Oct 1
• SUP 1: 172.46 50-day EMA
• SUP 2: 170.97 Low Aug 14 
• SUP 3: 169.73/45 Low Jul 31 / 23.6% of the Feb 28 - Jul 28 bull leg 
• SUP 4: 168.46 Low Jul 1   

The trend EURJPY is unchanged, it remains bullish and this week’s pullback appears corrective. Recent gains confirm a resumption of the uptrend and maintain the bullish price sequence of higher highs and higher lows. MA studies are in a bull-mode too, highlighting a dominant uptrend. Sights are on 175.43, the Jul 11 ‘24 high and a key M/T resistance. Support to watch lies at 172.46, the 50-day EMA. This level was pierced briefly Wednesday.

The MBA mortgage applications composite pulled back to 3-week lows in the Sep 26 week, with a 12.7% W/W decline that follows over 30% of gains seen earlier in the month.

• Purchase applications fell 1%, but it was refinancings - which had risen over 70% to lead overall gains in September - falling 20.6% that led the decline.
• Still, activity remains above levels seen at the start of the month.
• With falling mortgage rates key to the rise in applications, it's no surprise that a rebound in rates has coincided with a fall in applications: after dropping 35bp in the prior 4 weeks, 30Y conforming mortgage rates rose 12bp.
• At 6.46%, they remain below the 6.64% at the end of August, however; the same can be said for Jumbo rates which at 6.54% rose 10bp in the latest week though remain (just) below the 6.58% at end-August.
• Spreads widened slightly in the latest week, but the larger contributor was the underlying rise in Treasury/swap yields vs the prior week.
• Overall applications remain weak vs historical averages (see chart), particularly for outright purchases, though there is clearly an appetite for refinancing when rates dip. That suggests that unless rates go considerably lower, there is unlikely to be much impetus for renewed residential activity.