STIR: Repo Reference Rates

Near evenly paired option trade overnight, larger Apr'24 SOFR put condor a standout. Treasury options rather muted. Underlying futures bid, back near Monday's closing levels after Tuesday's sell-off. Projected rate cuts for early 2024 gains some traction: January 2024 cumulative -.6bp at 5.323%, March 2024 chance of 25bp rate cut -50.4% vs. -36.0 early Tuesday w/ cumulative of -13.2bp at 5.197%, May 2024 at 80.2% (72.6% early Tue) cumulative -33.3bp at 4.996%. June 2024 99.2% (93% early Tue) cumulative -58.1bp at 4.748%. Fed terminal at 5.325% in Feb'24.

• SOFR Options:
  • 11,000 SFRJ4 95.31/95.37/95.56/95.62 put condors
  • 1,500 SFRH4 94.87/95.12 1x4 call spds ref 94.87
  • 1,600 SFRZ4 96.50/97.12 call spds ref 96.03
  • 4,500 SFRH4 94.81/94.93 2x1 put spds ref 94.875
  • 1,500 SFRH4 94.68/94.81/94.93 put flys ref 94.87
  • over 5,400 SFRJ4 95.50 calls ref 95.305
  • 1,750 3QH4 96.75 calls ref 96.545
• Treasury Options:
  • 5,000 TYG4 111 puts, 6 last
  • 6,300 TYG4 112 calls, 5 last
  • 4,000 TYG4 111.5 calls, 14

Massimiliano Romeo, the leader of the right-wing populist League in the Senate, has submitted a resolution in the Senate that calls on PM Giorgia Meloni to push for a 'diplomatic path' towards a 'rapid solution to the conflict' in Ukraine. The League sits as a junior partner in Meloni's governing coalition. The resolution is also likely to be supported by the left-wing populist 5-Star Movement (M5S).

• The language of the resolution talks of the significant US and EU military and financial support to Kyiv, the lack of success in Ukraine's summer counteroffensive, and the prospect of a change in US administration that could result in a more 'isolationist' White House stance on Ukraine.
• Debates on the issue will take place concurrently in the Senate (with Defence Minister Guido Crosetto present) and the Chamber of Deputies (with PM Giorgia Meloni present) starting at 1500CET (0900ET, 1400GMT).
• Speaking to Il Fatto Quotidiano Tommaso Foti, group leader of Meloni's right-wing Brothers of Italy (FdI) in the Chamber of Deputies, referred to Romeo's resolution as a 'personal decision', and 'not that of the gov't'.
• The gov'ts majority would only be threatened on either chamber if the main opposition centre-left Democratic Party (PD) sides with the League and 5-Stars.
• Even if the resolution does not pass, the fact that it has been proposed by the League serves to highlight the evident divisions on the issue of Ukraine within the FdI-League-Forza Italia governing coalition.