US TSYS: Late SOFR/Treasury Option Roundup

SOFR & Treasury options trade outlined below: Decent volumes on two-way flow, post-CPI put trade subsided as underlying fully recovered from initial sell-off, focus turns to PPI, Retail Sales. Rate hike projections hold near late Tuesday levels (*): Oct'26 at +5.3bp (+5.5bp), Dec'26 +26.7bp (+26.7bp), Jan'27 +36.9bp (+37bp), Mar'27 +54.3bp (+54.4bp).

• SOFR Options:
  • -13,000 2QH7 95.25/95.50 put spds, 15.0 vs. 95.19/0.15%
  • +3,000 SFRZ6 95.37/95.50/95.62 put flys, 2.25 ref 95.67
  • +4,000 SFRH7 95.31 straddles, 41.0-41.5
  • +4,000 SFRZ6 95.43/95.56 2x1 put spds, 0.5 ref 95.665
  • +2,500 SFRZ6 95.43/95.50 put spds, 1.0 ref 95.67
  • -5,000 SFRX6 95.81/95.93/96.06 call flys, 0.5 ref 95.67
  • +10,000 SFRZ7 95.62/96.12 call spds, 11.25 ref 95.13
  • -8,000 SFRX6 95.75/95.81/96.00 call trees, 0.75 ref 95.67
  • +20,000 SFRV6 95.56/95.62 put spds, 1.5 ref 95.655)
  • 4,250 SFRZ6 96.25 calls, 1.0
  • 3,000 SFRZ6 95.87 calls, 2.0
  • -4,000 SFRX6 95.81/95.93 call spds, 5.0 ref 95.63
  • +4,000 2QM7 96.62 calls, 4.5 ref 95.165
  • -8,000 SFRZ6 95.50 puts, 3.0 ref 95.665
  • Block, 8,500 SFRV6 95.75 puts, 10.0 ref 95.75
  • +1,000 SFRZ6 95.68/95.75/95.81/95.87 put condors, 3.75 ref 95.75
  • 1,300 SFRF7 95.12/95.50 3x2 put spds ref 95.485
  • +5,500 SFRZ6 95.81/95.93 call spds, 1.75 ref 95.75
  • 4,400 0QH7 95.87 calls vs. 2,200 3QF7 95.37 calls
• Treasury Options:
  • 6,000 TYX6 106 calls, 7 ref 104-30.5
  • Block, 2,000 TUZ6 101/101.25/101.5/101.75 put flys, 4 net ref 101-27
  • 3,300 FVX6 103.5/103.75 put spds, 8.5 ref 103-21.75 to -22
  • Block, 16,500 TYZ6 109.5 calls, 2 vs. 104-17
  • 6,000 FVZ6 105/105.5 1x2 call spds, 4.5 net ref 103-16
  • 3,750 USZ6 103/105 2x1 put spds, 55 ref 103-17
  • 20,000 TYX6 105 calls, 10-13 ref 104-11.5 to -16 (total volume over 63.5k)
  • 25,000 TYZ6 103 puts vs. 106 calls, 6 net
  • over 35,000 TYX6 105 calls vs. TYZ6 103.5 puts
  • 7,000 TYZ6 106.5 calls, 11
  • over 7,000 FVX6 103.5 puts, 26.5 ref 103-07.5
  • 5,000 FVX6 103.25 puts, 18 ref 103-07.75
  • Block 10,000 TUZ6 100.87/101.25/101.62 put flys, 5 ref 101-27
  • 2,000 USX6 104 calls, 24 ref 102-27
  • 25,000 FVZ6 103.75/104.5 call spds, 12 ref 103-05.5
  • 5,000 TYX6 102.75 puts, 5 ref 103-31
  • +15,000 TYX6 104/104.25 strangles, 45
  • over 15,000 wk5 TY 103.5/104.5 strangles, 29 ref 103-30
  • 17,300 wk3 TY 104.75 puts, 14 ref 104-29 (exp 10/16)
  • 14,000 TUZ6 101.37/101.75 2x1 put spds
  • 4,400 TYX6 105.25 calls, 18
  • -1,000 TYZ6 105 calls, 49 ref 104-28/0.50%
  • 2,500 FVX6 102.75 puts, ref 103-24.25

• Treasuries have fully recovered from this morning's post-CPI lows, Tsy futures near the top end of the range - except for the short end: Curves twist flatter (2s10s -3.362 at 38.155, 5s30s -2.636 at 52.746) with projected rate hikes are near session highs. 25bp hike in Dec more than fully priced in.
• The above-expected 0.65% M/M headline CPI reading for September (0.48% MNI median) marked an acceleration from 0.40% in August and was the second-highest print on an unrounded since June 2022 (just edging the 0.64% in April this year, but below the 0.87% in March at the outset of the US-Iran War).
• Potential drivers: position squaring ahead of PPI and retail sales and weaker equities perhaps lending buying in intermediates to long end.
• Making headlines: cloud computing & AI data center operator CoreWeave trades -11.65% at the moment, as concerns over AI buildout costs and over-leveraged portfolios spooked investors, drawing a "Yikes" post by Elon Musk on X after CoreWeave's unsecured bonds maturing in 2032 (valued at $1.25 billion) surged toward 15%.
• PPI will be looked at most closely for the PCE component read-through, the aggregates will also be scrutinized for signs that rebounding energy prices are being reflected in pipeline pressures. Expectations are for overall final demand PPI to pick up to 0.6% M/M in September from 0.4%, with core steady at 0.3%, leaving those at 5.4% (unch) and 4.8%, respectively.
• Crude oil has risen further on Wednesday as markets digest further vessel attacks in the Strait of Hormuz alongside Saudi/Houthi and Russia/Ukraine hostilities.
• Look ahead: Japan Machine Orders followed by Australia September Labour Market data. In the US: PPI, Retail Sales and weekly jobless claims for the US. Central Bankers: BoC's Macklem, ECB's Pereira, Kocher, Moulin and Simkus as well as BoE's Pill and SNB's Schlegel will also appear.

• RES 4: 0.7238 High Sep 09 and a S/T bull trigger
• RES 3: 0.7140 High Sep 21
• RES 2: 0.7049 50-day EMA
• RES 1: 0.7011 20-day EMA
• PRICE: 0.6956 @ 16:52 BST Oct 14
• SUP 1: 0.6904 Low Oct 1
• SUP 2: 0.6865 Low Jun 30 and a key M/T support
• SUP 3: 0.6849 50.0% 2025 - 2026 bull leg
• SUP 4: 0.6833 Low Mar 30  

The current downtrend in AUDUSD remains intact and the latest recovery is - for now - considered corrective. Price has recently traded through 0.6953, the 76.4% retracement point of the Jun 30 - Sep 9 bull leg. The breach suggests potential for an extension towards 0.6865, the Jun 30 low and an important medium-term support. Initial firm resistance is at 0.7049, the 50-day EMA. A move through this average would be a bullish development.