US TSYS: LateSOFR/Treasury Option Roundup: Bullish Tone Ahead Tariff Deadline

Apr-01 19:05

SOFR and Treasury options favored upside call structures, bullish tone carried over to put selling while others took a stab at selling vol in May 10Y options ahead of tomorrow afternoon's reciprocal tariff announcement from DC. Projected rate cuts through mid-2025 rebounded from late Monday - look steady to mixed vs. this morning's levels (*) as follows: May'25 at -5.3bp (-4.7bp), Jun'25 at -22.1bp (-22.3bp), Jul'25 at -39.1bp (-38.6bp), Sep'25 -56.6bp (-56.1bp).

  • SOFR Options:
    • Block, +18,000 SFRM5 96.12/96.50 call spds, 4.0 ref 95.935
    • -10,000 0QK5 96.75/97.00 call spds, 6.0 vs. 96.60/0.15%
    • +7,000 SFRJ5 96.25 calls, 1.0 vs. 95.93/0.08%
    • +3,000 SFRZ5 96.62 calls,26.0 vs. 96.435/0.42%
    • 4,000 SFRQ5 95.50/95.68/95.87 put flys ref 96.225
    • 2,100 SFRM5 95.37/95.62 put spds vs. 96.37/96.62 call spds
    • 3,200 SFRM5 95.75/95.87/95.93 put trees
    • 3,000 SFRU5 96.25/96.50 call spds
    • 1,500 SFRU5 95.25/95.50/95.75/96.00 put condors ref 96.22
    • 10,000 SFRM5 96.06/96.18 call spds vs. 2QM5 96.75/96.87 call spds
    • 2,000 SFRM5 95.62/95.68 put spds ref 95.925
    • Block/screen, 6,000 SFRM5 96.12/96.50 call spds, 3.5 ref 95.915
    • 2,000 0QM5 97.00 calls vs. 2,500 97.50 calls ref 96.595
    • 1,500 2QJ5 96.75 calls ref 96.58
  • Treasury Options:
    • -12,000 TYK5 111 puts, 27 vs. 111-22.5/0.35%
    • -5,300 TYK5 111.5 straddles, 134
    • -10,000 TYK5 111/112.25 strangles, 100
    • 2,000 TUK5 103.75/103.87/104/104.25 broken call condors ref 103-22.5
    • 5,200 USM5 119 calls vs. wk1 US 119.5/121 call spds ref 118-18
    • 1,000 USK5 120/123/126 call flys ref 118-16
    • 8,000 TYK5 112/112.5/113/113.5 call condors ref 111-24.5
    • 7,000 Wed wkly TY 111.5/wk1 TY 111.75 call spds
    • over 10,200 TYK5 113 calls, 21 last
    • 10,000 TYM5 113.5/115.5 call spds ref 111-24
    • over 6,700 each: TYK5 111.5 and 112 calls
    • over 6,200 TYK5 114 calls 8 last ref 111-22
    • 2,000 FVK5 108.75/109 call spds ref 108-11.25
    • 8,000 TYK5 113.5/115 call spds ref 111-17.5

Historical bullets

US OUTLOOK/OPINION: A Stacked Week Ahead For US Macro

Feb-28 21:45
  • Next week sees a series a key risk points, starting with trade policy and Trump’s Mar 4 deadline for an additional 10% tariffs on China (for 20% total) and the imposition of the delayed 25% tariffs on Canada and Mexico. US Treasury Sec Bessent offered a potential offramp here, saying Friday afternoon the US wants to see Canada and Mexico match tariffs on China. Whilst following through with that could see temporary de-escalation in US trade tensions with Canada and Mexico, it would likely stoke greater likelihood of China retaliation and/or further fiscal support.
  • It’s bookended by ISM manufacturing (Mon) and services (Wed) reports, watched to see whether sharp increases in manufacturing prices paid seen in other surveys first show up in this broader measure and whether there is sign of spillover to services. 

 

  • The main data release of the week comes on Friday though, with the nonfarm payrolls report for February.
  • The January report saw a modest miss for nonfarm payrolls but it was more than offset by a robust two-month net revision along with a smaller than expected benchmark revision. Further, the unemployment rate again surprised lower at 4.0% for its lowest since May 2024 in a further step away from the 4.3% the median FOMC member forecast for 4Q25 in the December SEP.
  • Early days for the Bloomberg survey see nonfarm payrolls growth at a seasonally adjusted 155k in February and for the unemployment rate to hold at that lower 4.0%.
  • Note that the nature of the DOGE “deferred resignation program”, with some 77k federal employees accepting the offer, shouldn’t see any direct impact on payrolls growth (in the establishment survey) until the October report as workers will remain on the payroll in the interim. One area where the direct impact could show however is the household survey. Assuming those who accepted the offer are treated as equivalent to a furloughed worker, they’ll register as unemployed. A word of caution though, it’s a much more volatile survey, with a 90% confidence level of +-600k for employment vs +-136k for payrolls. 

 

  • Note that post-payrolls Fedspeak sees a notable addition this time, with Fed Chair Powell set to talk on the economic outlook with both text and Q&A, starting at 1230ET. Data and tariff deliberations should still set the tone, but at this juncture we wouldn’t be surprised to see a continued call for patience in rate cut expectations considering dovish repricing seen over the past week. This is a theme that could be seen from other notable Fedspeakers throughout the week, including permanent voters Williams, Waller and Kugler.  

STIR: Significant Dovish Repricing In US Rates This Week

Feb-28 21:14
  • The softer growth outlook has dominated signs of renewed inflationary pressures this week - see a key summary of the week's macro developments in the MNI US Macro Weekly here.
  • Fed Funds futures have a next 25bp Fed cut now fully priced for June and over the week have added nearly an entire 25bp cut over 2025 with a cumulative 70bp of cuts vs the 50bp implied by the median FOMC dot in Dec.
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Significant dovish adjustment over the week:

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MACRO ANALYSIS: MNI US Macro Weekly: No Escaping Tariff Distortions

Feb-28 21:12