TARIFFS: New US-China "Deal" Rates Look Like May 12 Figures Maintained

Tesoro Publico has announced it will be looking to sell a combined E2.0-3.0bln of the following letras at its auction tomorrow, May 13:

• the 3-month Aug 8, 2025 letras
• the 9-month Feb 6, 2026 letras

Heavy option volume overnight, mixed trade as markets adjust to US/China 90 day tariff reduction headlines (kicked off around 0300ET). Curves bear flattening while projected rate cut pricing retreats from late Friday levels (*) as follows: Jun'25 at -2.8bp (-4.3bp), Jul'25 at -13.1bp vs. (-17.2bp), Sep'25 -29.3bp (-34.9bp), Oct'25 -42.6bp (-49.7bp).

• SOFR Options:
  • 2,500 SFRV5 96.25/96.50/96.75/97.00 call condors ref 96.235
  • Block, 4,000 SFRK5 95.75/95.81 call spds, 0.50 ref 95.715
  • Block, 3,000 0QM5 97.00/97.37 call spds, 2.0 ref 96.53
  • 2,500 SFRZ5 95.75/95.87 put spds vs. 96.37/96.50 call spds ref 96.22
  • 20,000 0QU5 97.25/97.75 call spds ref 96.555
  • 4,000 SFRM5 95.62/95.68 put spds ref 95.71
  • 1,500 2QK5 96.00/96.25 2x3 put spds
  • 2,500 0QM5 96.56/97.06/97.56 call flys ref 96.495
  • 4,000 SFRZ5 96.75/97.00/97.50/97.75 call condors ref 96.21 to -.205
  • 2,500 0QU5 95.50/95.75/96.00/96.12 broken put condors ref 95.57
  • Block, 3,000 0QM5 96.25 puts, 4.5 ref 96.51
  • over 14,000 SFRU5 96.25/96.75 call spds ref 95.975
  • 4,000 SFRZ5 95.68/95.81 put spds ref 96.215
  • Block 3,000 SFRM5 95.75/95.87 2x1 put spds ref 95.715
  • Over 18,750 SFRK5 95.75 puts, 4.0 last ref 95.71
  • 3,000 0QN5 97.12/97.37 call spds ref 96.595
  • 13,000 SFRZ5 97.00/98.00 call spds, 8.0 ref 96.22
  • Block/screen, 11,000 SFRQ5 95.75/95.81/95.87/95.93 put condors, 1.25 ref 95.985 to -.98
  • 2,000 SFRQ5 96.50/96.75 vs. SFRZ5 97.00/97.50 call spd spd
  • 3,000 SFRM5 95.68/95.81 put spds ref 95.71
  • 2,000 SFRK5 95.75/95.87 2x1 put spds ref 95.71
  • 1,500 SFRU5 96.00/96.12/96.25/96.37 call condors, ref 95.98
  • 1,500 SFRH6 97.50/97.75/98.00/98.25 call condors ref 96.425
  • 1,500 SFRK5 95.50/95.62/95.75 put flys ref 95.715
  • 2,000 SFRM5 95.68/95.75 put spds ref 95.715
• Treasury Options:
  • over 5,000 FVM5 107.25 puts, 14 last
  • over 3,500 FVM5 107.5/109 strangles, 25 ref
  • 5,600 TYM5 110.75/112 call spds ref 110-03.5
  • over 8,500 wk5 FV 109/110 call spds ref 107-21 to -20.5
  • over 13,000 Wed wkly TY 109.5/109.75 put spds ref 110-08.5 to -06.5
  • 3,000 Wed wkly TY 110.75 puts, 26 ref 110-09
  • 4,100 FVM5 107.5/109 strangles ref 107-20.5
  • over 12,200 TYN5 109 puts, 24-27 ref 110-13

• She believes that the disinflationary process is still underway and that models suggest there is a supply constraint on the economy.
• She said that she was "torn" coming into this meeting as to whether she would vote for a cut or hold but said that even if she knew what she knew today (UK-US deal and US-China suspension of tariffs) that she would still have voted for a 25bp cut.
• She later said that she saw two-sided risks to inflation but that she didn't consider inflationary "transitory" - and was still concerned about inflation persistence.
• She used the same line as Lombardelli earlier that the MPC was more focused on domestic inflationary factors rather than trade.
• She sounded no more hawkish than either Governor Bailey or Lombardelli - but didn't really sound much more dovish than them either.
• Next speaker today will be a panel with Mann due to begin at 13:50BST.
• The panel event has concluded.