BUNDS: Probing the intraday low despite the softer US PPI

Rate hike projections climb vs. late Tuesday levels (*): Oct'26 at +11.7bp (+5.5bp), Dec'26 +33.7bp (+26.7bp), Jan'27 +46.1bp (+37bp), Mar'27 +64.6bp (+54.4bp).

• SOFR Options:
  • +20,000 SFRV6 95.56/95.62 put spds, 1.5 ref 95.655)
  • 4,250 SFRZ6 96.25 calls, 1.0
  • 3,000 SFRZ6 95.87 calls, 2.0
  • -4,000 SFRX6 95.81/95.93 call spds, 5.0 ref 95.63
  • +4,000 2QM7 96.62 calls, 4.5 ref 95.165
  • -8,000 SFRZ6 95.50 puts, 3.0 ref 95.665
• Treasury Options:
  • over 7,000 FVX6 103.5 puts, 26.5 ref 103-07.5
  • 5,000 FVX6 103.25 puts, 18 ref 103-07.75
  • over 35,000 TYX6 105 calls vs. TYZ6 103.5 puts
  • Block 10,000 TUZ6 100.87/101.25/101.62 put flys, 5 ref 101-27
  • 2,000 USX6 104 calls, 24 ref 102-27
  • 25,000 FVZ6 103.75/104.5 call spds, 12 ref 103-05.5
  • 5,000 TYX6 102.75 puts, 5 ref 103-31
  • +15,000 TYX6 104/104.25 strangles, 45
  • over 15,000 wk5 TY 103.5/104.5 strangles, 29 ref 103-30

While the opening levels don't seem big, the ESZ6 has dropped 55 points since the US CPI and is trading at session low.

• Fair value opens: SPX: 7,787.1 (-0.2%); DJIA: 51,593 (-0.1%/-77pts); NDX: 30,377.9 (-0.6%).

• Having struck a new cycle low in EURGBP earlier today, EURUSD is following suit on the back of the inflation print, bringing markets closer still to major support into 1.1111, the 50% retracement of the 2025 - 2026 range and presumably psychological level.
• The depth of the decline here has spot back into technically oversold ranges - although not to the same extent as the sell-off earlier in the month. Speed of the sell-off is another signal of the solid-pricing for the ECB in the very front-end relative to the rest of G10 and specifically the BoE & Fed.
• While today's spot decline mirrors the negative momentum in technical indicators, options market pricing is less aggressively priced: 3m risk reversals have recovered well off the early October lows to trade 0.8 points in favour of puts over calls, meaning EURUSD weakness could slow from here without any follow-up deterioration in options market positioning.