US TSYS: Late SOFR/Treasury Option Roundup: Better Puts Post-CPI, Sites on PPI
Jul-15 19:11
SOFR & Treasury options saw better put volume Tuesday, outright and spd, as underlying futures rejected the initial post-CPI rally. Focus turns to Wednesday's June PPI data. Curves hold flatter profiles/well off lows, 2s10s -0.067 at 53.072, projected rate cut pricing continues to soften vs morning/pre-data (*) levels: Jul'25 steady at -0.6bp, Sep'25 at -14.1bp (-15.7bp), Oct'25 at -27.1bp (-29.4bp), Dec'25 at -43.7bp (-46.7bp).
- SOFR Options
- Block/pit, -11,500 SFRU5 95.25/95.75 put spds, 3.5 ref 95.815
- Block, 5,000 SFRU5 95.68/95.81 2x1 put spds, 4.25
- Block, -10,000 SFRZ5 96.25/96.50/96.75/97.00 call condors, 4.0 net ref 96.125
- 1,250 SFRZ5 95.75/95.87/96.25/96.37 call condors
- Block, +20,000 SFRU5 95.62 puts, cab
- -16,000 SFRH6 96.00/96.50 put spds 23.75 vs. 96.385/0.30%
- 10,250 SFRU5 95.81 puts, ref 95.84
- +2,000 SFRU5 95.87/96.00/96.06/96.18 call condors, 2.75
- 2,000 SFRU5 95.56/95.68 2x1 put spds ref 95.85
- +2,500 SFRU5 95.25/95.75 put spds, 3.5
- +5,000 SFRZ5 95.75/95.87/96.00 put trees, 2
- 4,000 SFRQ5 95.75/95.81 put spds
- Block/screen +14,100 SFRU5 95.62/95.75/95.81/95.87 broken put condors, 0.5
- +2,500 SFRU5 96.12/96.37 call spds, 1.25
- Treasury Options:
- 13,200 TYV5 108.5 puts, 32 ref 110-08
- Block, 10,000 TYV5 108/TYX5 107.5 put strip, 54 vs. 110-10/0.20%
- +10,000 TYV5 113/115 call spds 12
- Block - adds to below w/ another 18,600 USU5 108 puts, 34-35 with 13,400 at 32 on screen
- Block, total 22,500 USU5 108 puts, 28-29 vs. 112-09/0.16%
- 6,500 TYQ5/wk3 TY 110 put spds, 4
- 5,000 TYQ5 112 calls, 4
- 2,000 TUQ5 103.25/103.37/103.62/103.75 put condors ref 103-20.38
- -10,000 TYU5 109.5/112 strangles, 38
- -2,500 wk3 TY 111.25 calls, 6 vs. 110-24.5/0.25%
- -2,000 FVQ5 107.75/108 put spds, 6
- +3,500 TYQ5 109.75 puts, 5 vs. 110-25/0.08%
- 2,000 TYQ5 111.5 calls, 9 vs. 110-24.5/0.21%
- -1,000 FVU5 108 straddles, 104.5 vs. 108-04/0.10%
- +20,000 FVQ5 107.75 puts, 7.5
- +4,000 Wednesday wkly TY 111.5/111.75 call spds, 1 ref 110-23.5 to -24.5
- +10,000 TYQ5 112 calls, 4
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US FISCAL: Available Extraordinary Measures Pick Up Ahead Of Tax Date
Jun-13 20:42
Treasury had $144B in "extraordinary measures" available to keep the government financed as of June 11 per a release Friday. That is up from $84B a week earlier and the highest since April 28.
- However, TGA cash continues to fall, to $309B latest (lowest since early April) Combined with a pullback in Treasury cash ($376B), keeping the total resources available to avert an "x-date" in the summer at around $450B .
- There will be another uptick in Treasury cash in the coming days, and it's likely Treasury allowed some of the extraordinary measures to be rebuilt (ie not exercised) in anticipation of more cash coming in.
- This is likely to be the last major uplift before the summer at which point x-date speculation will pick up if Congress hasn't passed a debt limit increase by then.
FED: Two Cuts Priced This Year Headed Into FOMC Week
Jun-13 20:28
As we head into the June Fed meeting week, market pricing is reflective of the FOMC’s messaging (that we describe in our preview):
- The next cut is only fully priced by the October FOMC meeting, with September seeing a roughly 80% implied probability of bringing the next 25bp reduction.
- Exactly 50bp of cuts are priced through end-2025, implying two Q4 cuts.
- That’s a shift from just after the May meeting, after which the next cut was fully priced by September, and there were closer to three cuts priced for the rest of the year.
- Overall cuts are seen backloaded this year (after 15bp in September, 29bp of cuts priced in Q4 - Oct/Dec combined), but falls off in Q1 (just 21bp cuts priced, 9bp of cuts priced for January and 12bp for March)
FED: Summary Of Economic Projections: Higher 2025 Inflation, Weaker Growth
Jun-13 20:21
The MNI Markets Team’s expectations for the updated Economic Projections are below.
- As of the May meeting, the Federal Reserve staff – whose outlook tends to be broadly shared by the median Committee member – revised their forecasts for growth weaker in 2025 and 2026, “as announced trade policies implied a larger drag on real activity relative to the policies that the staff had assumed in their previous forecast. Trade policies were also expected to lead to slower productivity growth and therefore to reduce potential GDP growth over the next few years. With the drag on demand expected to start earlier and to be larger than the supply response, the output gap was projected to widen significantly over the forecast period. The labor market was expected to weaken substantially, with the unemployment rate forecast moving above the staff's estimate of its natural rate by the end of this year and remaining above the natural rate through 2027."
- On inflation, "The staff's inflation projection was higher than the one prepared for the March meeting. Tariffs were expected to boost inflation markedly this year and to provide a smaller boost in 2026; after that, inflation was projected to decline to 2 percent by 2027."
- Our expectations for these changes fall somewhere in between those projections and the March SEP – a slightly higher unemployment rate, substantially higher inflation in 2025 but to a lesser extent in 2026, and weaker GDP growth this year. Longer-run variables should be unchanged.
MNI Markets Team Expectations For June 2025 Summary Of Economic Projections Medians
