STIR: Repo Reference Rates

• USDCAD at ~1.356 holds close to earlier lows despite e-minis slipping further and crude futures paring latest gains. It’s off yesterday’s high of 1.3587 in a move that took the pair back into pre-Easter ranges.
• The trend outlook remains bullish with resistance at the repeatedly tested bull trigger of 1.3614.
• There is no notable option expiry at nearby strikes for today’s NY cut, adding scope for reaction to any surprises in the US JOLTS report.
• Last week’s CFTC data showed a sizeable widening in CAD net shorts as of Mar 26. They stand at -26% OI (from -16% the week prior) having been almost neutral in late Feb, moving back closer to the recent low of -34% seen late last year.

• Recapping yesterday’s data, the BOS/CSCE surveys were mixed. Of note within the BOS, business sentiment improved and fewer companies are expecting recession, but from a dovish angle there was decent moderation in price-setting behaviour, a sizeable shift from those seeing 2Y average price increases of >3% to 2-3% and a deterioration in capex intentions.
• Adding to dovish developments, separate insolvency data for February showed a further sizeable 25% Y/Y increase for consumers and more notably reinforced the sharp increase for businesses seen in Jan, holding 122% Y/Y in Feb.

Better upside hedging in SOFR options this morning, carry-over from Monday's session as accts look for a rebound in underlying futures. Curves are steeper with the short end outperforming this morning, while projected rate cut pricing inches off late Monday lows: May 2024 at -8.8% vs -6.7% late Monday w/ cumulative -2.2bp at 5.307%; June 2024 -53.3% w/ cumulative rate cut -15.5bp at 5.174%. July'24 cumulative at -23.6bp, Sep'24 cumulative -40.0bp.

• SOFR Options:
  • Block, 10,000 SFRZ4 96.62 calls, 7.0 ref 95.335
  • 11,500 SFRM4 94.93/95.06/95.18 call flys ref 94.835
  • Block, 3,750 SFRZ4 96.50/97.25/98.50 broken 2x3x1 call flys, 5.0 vs. 95.36/0.10
  • 2,000 SFRJ4 94.81/94.87/94.93 call flys ref 94.835
  • 5,800 SFRN4 95.00/95.06 put spds ref 95.07
  • 7,200 SFRU4 95.00/95.12 put spds ref 95.07
• Treasury Options:
  • 5,300 TYK4 109.5 puts, 34 last ref 109-26.5
  • 2,900 FVM4 108.5 calls ref 106-16.5
  • 2,500 TYK4 114 calls, 1 ref 109-31.5

The office of Israeli Prime Minister Benjamin Netanyahu has confirmed that Israel has drafted a new ceasefire/hostage release proposal and presented it to Hamas. Netanyahu's office said: "As part of the talks, with the helpful mediation of Egypt, the mediators formulated an up-to-date proposal to be addressed by Hamas."

• Multi-party talks aimed at securing a temporary ceasefire in exchange for the return of hostages held in Gaza resumed in Cairo, Egypt on Sunday after collapsing last week.
• NYTs noted yesterday: "American officials say that they are also hoping the warring sides reach an agreement soon, and that any temporary cease-fire reached to allow the exchange of hostages for Palestinian prisoners might be extended into a longer-lasting peace."
• The prospect of a positive outcome may be boosted by confirmation that Israel has agreed to reschedule an in-person meeting - likely to take place next week - with US security officials to discuss alternative proposals to an IDF ground operation in the southern Gazan city of Rafah.
• According to a joint US-Israeli statement, following a virtual meeting: “The two sides over the course of two hours had a constructive engagement on Rafah. They agreed that they share the objective to see Hamas defeated in Rafah. The U.S. side expressed its concerns with various courses of action in Rafah. The Israeli side agreed to take these concerns into account and to have follow up discussions between experts..."