US TSYS: Late SOFR/Treasury Option Roundup: Puts, Back Where We Started

We expect that the June meeting communications will reflect an increasingly patient attitude since May and certainly since March’s projections. Our full meeting preview, including analyst expectations, is Here.

• With the Statement in need of only mark-to-market edits, and Chair Powell’s commentary unlikely to be much different from May’s press conference, this patience will be mostly reflected in the new SEP.
• There is a fairly low bar to the 2025 rate median to shift up to show 1 cut instead of March’ 2, and that seems like the most likely outcome.
• Overall despite its patience, the FOMC’s easing bias remains, perhaps aided to some extent by recent inflation data coming in softer than feared. This will be reflected in the 2026-27 dots which will show that the destination remains more or less the same, just with a delay.
• This may mean an awkward message alongside the new economic forecasts, which are likely to show a significant upward revision in near-term inflation which doesn’t quite subside to target by end-2026, alongside an unemployment rate that doesn’t rise significantly.
• Squaring the circle there is the likelihood that participants’ risk assessments for growth and inflation will remain elevated and could even increase further from March’s extremes.
• Put another way, the situation is fluid. In the meantime, the FOMC sees policy as being in a position to react according to developing circumstances. 

SOFR & Treasury option flow leans bullish Tuesday as Middle East tensions spurred risk-off support in rates. Breadth of moves rather modest as markets also await Wednesday's FOMC policy annc. Despite the rally, curves bull flattened while projected rate cut pricing retreated from morning's levels (*) as follows: Jun'25 at 0.0bp, Jul'25 steady at -3.6bp, Sep'25 at -17.7bp (-19.5bp), Oct'25 at -29.6bp (-32.6bp), Dec'25 at -45.2bp (-48.8bp).

• SOFR Options
  • -10,000 SFRZ5 95.56/95.68/95.81 put trees, 2.125
  • +5,000 SFRZ5 96.25/96.50/96.75 call flys, 2.0 ref 96.11
  • -15,000 SFRU5 95.75/95.87 2x1 put spds 2.0 over SFRZ5 95.62/95.75 2x1 put spds
  • +10,000 0QZ5 96.75/97.00/97.50/97.75 call condors, 6.0 ref 96.695
  • Block: -9,000 SFRZ5 97.00/97.25/97.75/98.00 call condors, 0.75 ref 96.09.5
  • -10,000 0QZ5 97.50/97.62 call spds, 1.75 vs. 96.73/0.05%
  • +2,500 SFRZ5 96.37/96.75 call spds vs. 0QZ5 97.25/97.50 call spd, 1.5 net/steepener
  • +2,500 SFRN5 95.37/95.68 put spds, .37
  • -4,000 SFRU5 95.68/95.81/96.25/96.37 call condors, 5.25 ref 95.875
  • 2,000 0QU5 96.75/97.00/97.25 call flys ref 96.68 to -.675
  • 3,000 SFRN5 96.00/96.12/96.75 broken call trees ref 95.885
  • +13,500 SFRQ5 95.62/95.75 put spds 2.5
  • 2,000 SFRZ5 96.37/96.75 call spds vs. 0QZ5 97.25/97.50 call spds
  • +1,250 SFRZ5 96.25/96.37/96.62/96.75 call condors, 1.75 ref 96.13
  • +2,000 0QZ5 97.00/97.31 call spds, 8
• Treasury Options
  • -5,250 TYN5/TYQ5 111.5 put spds, 35 (Aug over) ref 110-28
  • 8,000 TYN5 110.75/111 call spds, 6 ref 110-25
  • 10,000 TUQ5/TUU5 104 call spds, 4.5 ref 103-20.25
  • 3,500 TYN5 111/111.5 call spds ref 110-25
  • 5,000 wk4 TY 110.75 straddles, 56 ref 110-25.5 (exp 6/27)
  • 3,000 TUN5/TUQ5 103.75 call spds 8 ref 103-20.88
  • 2,000 TYN5 110.5 straddles, 38.0
  • +2,000 FVN5 108.5 calls, 5 vs 108-03/0.24%
  • +5,000 TUQ5 103/104.125 call over risk reversals, 4 ref 103-20
  • +3,000 FVQ5 107.25/109 call over risk reversal, 1 ref 108-01.5
  • +2,500 TYU5 111.5 calls, 54 vs. 110-22/0.22%
  • +3,000 Wed wkly 111/111.25 call spds, 3 ref 110-18.5 (exp tomorrow)
  • +2,000 FVN5 108.25 calls, 7 vs. 107-31.25/0.30%

• Crude has extended gains after US administration rhetoric late in the day raised the prospects of US direct involvement in the Iran-Israel conflict.
• WTI Jul 25 is up by 4.9% at $76.8/bbl, taking gains over the last week to over 15%.
• Several military analysts and reporters have interpreted VP JD Vance's recent social media post as laying the groundwork for President Trump to authorise the use of 'bunker buster' bombs to strike Iran's Fordow nuclear facility.
• The sharp rally in WTI futures marks an acceleration of the current bull phase. Price action is likely to remain volatile near-term, and from a technical standpoint, the trend is currently in an extreme overbought position.
• A continuation higher would expose the $80.00 handle, followed by $81.93, a Fibonacci projection.
• Meanwhile, spot gold is little changed at $3,383/oz.
• A bullish theme in gold remains intact, with initial resistance at $3,451.3, the Jun 16 high. Initial key support to monitor is $3,271.7, the 50-day EMA.
• By contrast, silver has rallied by 2.0% today to $37.0/oz, taking the precious metal to a new multi-year high. As a result, the gold-silver cross has fallen to 91.4, close to recent 2-month lows.
• A bull wave in silver remains in play, with sights on $37.195 next, a Fibonacci projection, which was pierced earlier. A clear break would open $37.478, the March 2012 high.