STIR: Midmorning SOFR Option Update
Two-way SOFR option flow leaning towards low delta put structures since the open. Underlying futures weaker, near morning lows while projected rate cuts through mid-2025 continue to recede vs. early morning levels (*) as follows: Mar'25 at -0.2bp (-1bp), May'25 at -8bp (-9.4bp), Jun'25 at -24.2bp (-26bp), Jul'25 at -35.7bp (-37.5bp).
- +8,000 SFRU5/SFRZ5 95.37/95.62/95.87 put fly spread, 0.5 net, Sep over
- +7,000 0QU5 97.00/97.50 call spds vs 95.75 puts, 0.25 net call spd over ref 96.465
- +2,000 0QM5 96.93/97.43 4x5 call spds vs 95.81 puts, 7.5 net/call spd over ref 96.45
- +2,000 SFRM5 95.93 straddles 27.0 ref 95.95
- +7,000 SFRM5 95.75/95.87/95.93 put trees, 1.0 ref 95.945
- +4,000 SFRZ6 95.00/95.50/96.00 put trees, 1.5 ref 96.42
- -5,000 2QM5 96.12/96.37 call spds vs.3QJ5 96.12/96.37 call spd flattener 2.0 net
- -5,000 SFRJ5/SFRK5 95.87/95.93 1x2 put spd strip 5.0-4.25 ref 95.94
- +10,000 SFRJ5 95.68 puts, 0.25 ref 95.94
- -2,500 0QZ5 96.50/97.00 call spds vs 95.25 puts, 10.5 net/c spd, 96.43
- -4,000 SFRZ5 95.75/96.25 put spds, 21.0 ref 96.325
- +5,000 SFRM5 95.62/95.81/96.00 put tree vs. 96.06/96.31 call spd, 1 net ref 95.95
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EQUITIES: US Cash opening calls
US Cash opening calls, will be set to be positive, but still short of Friday's best levels.
- Calls: SPX: 6,063.6 (+0.6%); DJIA: 44,590 (+0.6%/+286pts); NDX: 21,680.2 (+0.9%).
EQUITY TECHS: E-MINI S&P: (H5) Short-Term Reversal Threat
- RES 4: 6178.75 High Dec 6 and key resistance
- RES 3: 6162.25 High Jan 24
- RES 2: 6147.75 High Jan 31
- RES 1: 6123.25 High Feb 7
- PRICE: 6081.25 @ 14:15 GMT Feb 10
- SUP 1: 6014.00/5935.50 Intraday low / Low Feb 3
- SUP 2: 5892.37 76.4% retracement of the Aug 5 - Dec 6 bull leg
- SUP 3: 5842.50 Low Jan 14
- SUP 4: 5809.00 Low Jan 13 and a key resistance
The initial sell-off on Feb 3 in the S&P E-Minis contract and the breach of support at 5948.00, Jan 27 low, continues to highlight a possible S/T reversal threat. If correct, it suggests that the latest bounce is a correction. A resumption of weakness would open 5892.37, a Fibonacci retracement point. On the upside, a stronger rally would expose key resistance at 6178.75, the Dec 6 ‘24 high. Clearance of this hurdle would resume the primary uptrend.
STIR: UBS Continue To Recommend Receiving Dec '25 ECB OIS
UBS continue to recommend receiving December ’25 ECB-dated OIS, looking for another ~10bp in the trade.
- They note that “even on current market pricing of a deposit rate around 1.80% by the end of 2025, real policy rates will still be well above pre-pandemic averages.”
- They then go on to highlight several dovish risks underscoring their view, including U.S. tariffs on Chinese or EU imports, the ECB indicator for negotiated wages pointing to slower wage growth by year-end and the ECB’s last corporate survey suggesting a relatively weak employment outlook.
