US TSYS: Late SOFR/Treasury Option Roundup: Projected Rate Cuts Decline
Option desks report heavy two-way SOFR & Treasury flow Friday, better SOFR calls while Treasuries saw better put volume. Underlying futures weaker, near lows after volatile post jobs trade: TYH5 gapping to 110-00 on lower than expected jobs gain only to reverse course - extend lows (109-06 at the time) on large up-revisions to prior data. Projected rate cuts through mid-2025 consolidate vs. morning levels (*) as follows: Mar'25 at -2.5bp (-3.9bp), May'25 at -7.3bp (-10.7bp), Jun'25 at -15.8bp (-19.6bp), Jul'25 at -20.6bp (-25.1bp).
- SOFR Options:
- 5,000 SFRH5 95.75 calls ref 95.715
- +7,500 0QK5/0QM5 96.00/96.25/96.50/96.75 call condor strip, 13.5 total db
- +10,000 SFRZ5 97.00 calls 3.25 over 0QZ5 97.50 calls, appr 30k steepener positions
- +7,000 SFRM5 95.75/96.00/96.25 call flys, 4.25
- +5,000 SFRJ5 95.62/95.68 put spds, 0.375 ref 95.825
- Block, 9,000 SFRM5 95.81/95.87/95.93/96.00 call condors, 1.5 net ref 95.85
- over +37,000 SFRU5 95.37/95.62/95.87 put flys, 9.0 ref 95.955
- S0U S3U 9650/9700cs spread +1.75/2500 (S0U
- S0G 9600/9606p stupid fut 9606.5 .80d -5K @9
- S0H 9581/9593/9606pf 2.25/5K, bid (9606
- S0G 9612^ +13.5/5K (9606
- SRU5 9575/9600cs fut 9596.5 .20d -5K @11
- -10,000 SFRM5 96.25/96.43 call spds, 1.0 ref 95.855
- 1,500 SFRK5 95.68/95.75/95.81 put flys ref 95.88
- 4,250 SFRM5 96.50/97.00 call spds ref 95.875 to -.87
- 4,500 SFRG5 95.81 calls, cab ref 95.74
- 2,000 SFRJ5 96.06 calls ref 95.875
- 2,000 SFRZ5 96.00/96.37/96.75 call flys ref 96.055
- 1,500 3MQ5 95.00/95.50 put spds vs. 96.75/97.00 call spds ref 96.05
- Treasury Options:
- 6,000 TYJ5 107/109/109.5/111.5 iron condor on 2x3 ratio for 156 net (+2x body vs. -3x wings) appr $11.25M premium outlay for structure that expires on March 21.
- -20,000 TYH5 109 puts 30-29 (fractional unwind of over 100k bought this week from 28 to 16)
- over 10,000 FVH5 105.5/106/106.5 put trees ref 106-16.5
- over +29,000 TYH5 107.75 puts, 8 vs. 109-04 to -06/0.16%, appr 6.7% implied vol targets 4.65% yld
- over +52,000 TYH5 108 puts, 7-10 ref 109-08 to -07
- Blocks, total 29,000 Mon weekly 10Y 109.25 puts, 14 vs. futures on 50% delta/unwound on screen
- -20,000 TUH5 102.75 puts, 7 ref 102-24.88
- 4,000 TYH5 112 calls, 4 ref 109-19
- 2,000 TYH5 110.5/111.5/112.5 call flys ref 109-19
- 2,000 TYH5 111.5 calls, 6 ref 109-18.5
- 2,600 TYH5 110.5 calls, 16 ref 109-16
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GBPUSD TECHS: Bear Cycle Extension
- RES 4: 1.2672 50-day EMA
- RES 3: 1.2607 High Dec 30
- RES 2: 1.2550/2576 20-day EMA / High Jan 7
- RES 1: 1.2476 Low Dec 20
- PRICE: 1.2356 @ 19:47 GMT Jan 8
- SUP 1: 1.2321/2300 Low Jan 7 / Low Apr 22 ‘24 and a key support
- SUP 2: 1.2226 0.618 proj of the Sep 26 - Nov 22 - Dec 6 price swing
- SUP 3: 1.2187 Low Nov 10 2023
- SUP 4: 1.2087 0.764 proj of the Sep 26 - Nov 22 - Dec 6 price swing
The trend condition in GBPUSD remains bearish and Wednesday’s sharp sell-off reinforces the bear trend. The move down has also confirmed a resumption of the bear leg and an extension of the price sequence of lower lows and lower highs. Sights are on 1.2300 next, a break of this level would open 1.2226, a Fibonacci projection. Initial firm trend resistance has been defined at 1.2576, the Jan 7 high.
COMMODITIES: WTI Falls, Copper Pierces Resistance At 50-Day EMA
- Crude has extended its losses today after EIA crude stock changes came as expected and product inventories saw large builds.
- WTI Feb 25 is down by 1.3% at $73.3/bbl.
- The trend structure in WTI futures remains bullish, despite today’s correction, with sights on key short-term resistance at $76.41, the Oct 8 high. Initial support is seen at the 20-day EMA, at $71.32.
- Spot gold has edged up by 0.3% to $2,657/oz, albeit it is off the session highs of $2,670, which marked the highest level for the yellow metal since Dec 13.
- A bear threat in gold remains present despite the latest recovery. However, a strong climb would signal scope for a move towards resistance at $2,726.2, the Dec 12 high.
- Meanwhile, copper has rallied by a further 1.7% to $427/lb, taking the red metal to its highest level since Dec 12.
- The move comes as Codelco announced a $1.5bn USD-bond issuance to help fund record investments. It will offer two benchmark-size tranches of about $750mn each, one maturing in 10 years and the other in 30 years, according to people familiar with the matter.
- A bearish trend condition in copper futures remains intact and the latest recovery appears corrective.
- However, price has traded through the 50-day EMA, at $420.33, exposing key short-term resistance at $433.50, the Dec 12 high. A break of this level would highlight a reversal.
EURUSD TECHS: Trend Needle Points South
- RES 4: 1.0825 High Nov 7
- RES 3: 1.0630 High Dec 06
- RES 2: 1.0530 50-day EMA
- RES 1: 1.0437/58 High Jan 6 / High Dec 30
- PRICE: 1.0312 @ 19:45 GMT Jan 8
- SUP 1: 1.0226 Low Jan 2
- SUP 2: 1.0209 3.0% Lower Bollinger Band
- SUP 3: 1.0201 61.8% of the Sep ‘22 - Jul ‘23 bull leg
- SUP 4: 1.0160 2.0% 10-dma envelope
The trend condition in EURUSD remains bearish and recent gains appear corrective. The Jan 2 sharp sell-off reinforces current conditions and note too that moving average studies are in a bear-mode position, highlighting a dominant downtrend. The 20-day EMA, at 1.0405, has been pierced. The next resistance to watch is 1.0458, the Dec 30 high. The bear trigger has been defined at 1.0226, the Jan 2 low.
