EURJPY TECHS: Sights Are On The Bull Trigger

Option desks reported better upside call volume on net underlying futures see-saw near midday highs (TYM5 +7.5 at 112-04.5 vs. -07.5 high). Curves mildly steeper (2s10s +.412 at 51.346). Projected rate cut pricing rising in the second half of the year compared to this morning's levels (*) as follows: May'25 at -2.6bp (-2.3bp), Jun'25 at -16.9bp (-16.9bp), Jul'25 at -39.1bp (-37.6bp), Sep'25 -61.0bp (-57.4bp).

SOFR Options:
+20,000 SFRU5 96.00 puts, 10.0 vs. 96.315 to -.32/0.25%
-15,000 SFRN5/0QN5 96.12/96.25 call spd spd, 5.25 midcurve over, steepener
+10,000 SFRZ5 96.75/97.25 call spds, 14.25 ref 96.645
-8,000 0QM5 96.87/97.00/97.25/97.3 call condors, 2.87 ref 96.98
+2,500 0QM5 97.50/98.00/1000 2x3x1 call flys 7.0 vs. 96.365/0.14%
+3,500 0QK5 96.75 puts, 6.5
+5,000 SFRZ5 96.00/96.25/96.50 put trees, 2 ref 96.585
-4,000 0QM5/2QM5 95.87/96.12 put spd strip w/2QM5 96.00/96.25 put spd, 2.5 total
21,000 SFRM5 95.87/96.00/96.25/96.37 call condors
15,400 SFRM5 95.75/95.81 put spds ref 95.895
11,400 SFRM5 95.68 puts, 0.5 last
over 5,900 SFRZ5 95.62 puts, 3.5 last
12,580 SFRZ 95.56/95.68/95.81 put flys ref 96.575
2,500 0QZ5 97.00/97.50 call spds ref 96.935
1,850 SFRK5 95.81/96.18 1x2 call spds ref 95.885

Treasury Options:
+15,000 wk2 TY 112.75 calls, 21
2,500 TYM5 112 straddles,
+5,000 TYM5 109/113 strangles, 35-36
-6,000 TYM5 111.75 straddles, 142 (imp vol 7.22%)
+12,000 TYM5 110/113 strangles, 38-39 vs. 111-25/0.25% (imp vol 7.36%)
20,000 wk1 5Y (exp Fri)/Mon wkly 5Y (exp Mon) 110 call spds ref 108-26.75
6,300 TYM5 113/116 call spds ref 111-27.5
over 4,300 TYM5 114 calls

• Total of 8,000 SOFR White packs (SFRM5-SFRH6) Blocked at +0.030, most likely swap related with spreads running tighter in the vicinity.

Some analyst expectations for Wednesday's Refunding guidance, and future coupon size increases,  below (note there are no analysts who expect coupon sizes to be upped at this meeting):

Deutsche

• Future coupon auction upsizing: Starts Q1 2026 (pushed back 1Q)
• Guidance: “We see roughly even odds between Treasury keeping the existing language and updating it.” Could replace “several” with “few/a  couple”, signalling that coupon increases are not in current baseline but could be necessary later in the year depending on the fiscal outlook, or (unlikely) dropping guidance altogether.

Goldman Sachs

• Future coupon auction upsizing: Starts Aug 2026 (pushed back from Feb 2026). “The combination of the market environment and medium-term uncertainty around funding needs make it hard to have strong conviction on the timing of when coupon auction sizes might rise.”
• Guidance:  Unlikely to “significantly change” guidance.

TD Securities

• Future coupon auction upsizing: Late 2026 (pushed back from November 2025 prior).
• Guidance: “Given debt ceiling dynamics, the tariff revenues, and a desire to bring longer-dated yields lower, we think Treasury will choose to leave guidance unchanged once again.”

Wells Fargo

• Future coupon auction upsizing: Announced Jan 2026.
• Guidance:  Lean toward unchanged, but “we will not be surprised if Treasury scraps this language. If the federal deficit widens by more than we expect in the quarters ahead, there is a chance Treasury could initiate the next wave of auction size increases at the October refunding. Scrapping the forward guidance language would preserve maximum flexibility.”