SOFR OPTIONS: More Call Fly buyer

Wholesale sales rose 0.1% M/M in May (ex petroleum, products, other hydrocarbons, oilseed & grain), rising in 5 of 7 subsectors and marking a return to growth after two contractions. This was a better result than the -0.4% M/M seen in StatCan's advance estimate, and significantly better than the -2.2% in April (upward rev by 0.1pp).

• An easing of trade tensions with the US appears to have contributed to the improvement - StatCan notes: "Feedback from respondents for May indicated that the impact of trade tensions between Canada and the United States eased slightly in the month. The share of respondents indicating that the ongoing trade issues had an impact on their businesses fell from 43.6% in April to 36.9% in May."
• Volumes rose 0.2% M/M, while the Y/Y growth came in at 1.8%.
• While the sharp decline in wholesale sales in April pretty much assures a negative contribution to GDP in Q2 (is now running at -2.0% 3M/3M SAAR), the upside surprise in May versus the advance estimate is a marginally modest positive for May monthly GDP.
• We get that data on July 31, the day after the BOC decision; the advance estimate is for a 0.1% M/M contraction.
• In a more ambiguous sign, Inventories meanwhile rose 0.8% for the biggest gain in 4 months, putting the inventory-to-sales ratio at 1.55x - the highest since September 2024.

Late on Friday Goldman Sachs recommended 5-Year swap spread wideners at -39.6bp, targeting -32bp, with a stop set at -43bp.

• They noted that “swap spreads seem to embed some risk premia for more funding pressure and the broader supply trajectory, more clearly in the front-end and belly of the curve. With front-end and intermediate swap spreads towards the tight end of their historical range and cheap to fair, we see value to reengaging with longs”.

• +5,000 2QU5 97.00/97.50 call spds vs. 3QU5 96.75/97.25 call spds, 0.5 net Green Sep over at 0842:30ET