SOFR: Net Short Setting Dominated In Futures On Thursday

• Q: "You mentioned that a fair society is one where the wealthiest pay their fair share, and you discussed narrowing the gap between the tax on income from assets and income from work. Is there more left of that gap to be narrowed?"
• A: "If you go out to work, you pay National Insurance and you don't pay national insurance on other forms of income, but we have taken action in this budget to narrow the gap between those different forms of income." (Savings, rental, dividends)
• Regarding eVED (tax per mile on EVs and PHEVs): "We have no plans to increase that further, and wouldn't do so until the move to electric vehicles is well secured, but we've set it at a half rate for a reason."

• Fed Funds implied rates for meetings out to mid-2026 hold their hawkish tilt seen yesterday with surprisingly strong JOLTS job openings despite some softer details such as the quits rate in particular.
• Whilst a 25bp cut today is seen as extremely likely, the next fully priced cut doesn’t come until June under a new Fed Chair.
• The FT reported Trump will soon launch a final round of interviews for Fed Chair, pitting NEC’s Hassett against a trio of other candidates. He’s still a firm favorite in betting markets although the 70% on Polymarket currently shows as the lowest since Nov 30.
• Cumulative cuts from 3.89% effective: 23.5bp Dec, 29bp Jan, 34.5bp Mar, 39.5bp Apr and 51bp Jun.
• SOFR futures have modestly extended recent declines however, following European rates on the day, with losses of up to -0.025 in late 2027 contracts.
• It sees a terminal implied yield of 3.245% (Z6/H7) for ~25bp higher than lows after NY Fed Williams’ unusual guidance on a near-term cut. This last sustainably closed higher in June, leaving an already hawkish backdrop ahead of Powell’s press conference.
• MNI Fed Preview: https://media.marketnews.com/Fed_Prev_Dec2025_With_Analysts_4d5a318a2b.pdf

ERU6 98.00/98.50cs vs 97.87/97.62ps, bought the cs for -2 and -1.75 (receive) in 10k.