SOFR OPTIONS: Post-PPI Call Sales

Gilts have been in a bit of a holding pattern since the opening rally, with the dovish details of the KPMG-REC report on jobs limiting pullbacks, even as Bunds trade around/at session lows.

• Futures topped out at 92.37 before settling back around 92.25.
• Initial resistance of note located at the August 5 high (92.84). Bulls look to regain momentum after a close below the 20-day EMA.
• Yields ~4bp lower across the curve.
• 2s and 10s hold in the lower half of the ranges witnessed since early June, 2s last 3.865%, 10s last 4.565%.
• 2s10s and 5s30s continue to trade around 70bp & 140bp, respectively.
• 10s outperform Bunds by 4bp, spread into 187bp.
• SONIA futures flat to +3.5.
• BoE-dated OIS prices 18bp of easing through year-end and 28bp through February. Contracts are 0.5-2.0bp more dovish on the day.
• Domestic focus is squarely on tomorrow’s labour market report.
• With a continually softening labour market a necessity for another BoE cut in November, Tuesday’s report will be keenly watched by the market. Unlike last month’s release there is no obvious smoking gun to watch out for as the revision to the flash payrolls print for June has returned the focus back to the wider report.
• Click for our full preview of the release.

• EUR/USD: $1.1500(E1.5bln), $1.1535-50(E1.2bln), $1.1650(E1.1bln)
• USD/JPY: Y147.30-50($1.6bln)
• AUD/USD: $0.6560-75(A$1.5bln)
• USD/CAD: C$1.3785($664mln)

Recent steepener interest in SOFR spreads:

• SFRH6/Z6 paper paid -43.0 on 9K.
• SFRH6/U6 paper paid -36.0 on ~5.5K