SOFR OPTIONS: SOFR Ratio Put & Straddle Spreads

EGBs and Gilts rallied Wednesday.

• Gilts outperformed despite UK inflation data coming out on the firmer side of expectations. MNI's Markets Team saw little in the way of "game-changing" information in the report in terms of the BOE's approach to policy, with headline inflation just 7 hundredths above the BOE's forecast at 3.83%Y/Y in July (MNI median 3.7%, BOE 3.76%, 3.58% in June) and much of the upside surprise driven by volatile airfares/accommodation prices.
• Yields descended through much of the session from there, with a further firming notable in Bunds in mid-afternoon as US tech stocks dipped sharply (albeit without any headline trigger).
• In other data, Eurozone final HICP showed marginal upward revisions to the core and services measures.
• Meanwhile, ECB's Lagarde said that uncertainty has been "alleviated, but certainly not eliminated" though this had little impact on rate pricing.
• On the day, the belly outperformed on the German curve, while the UK curve bull flattened. Periphery/semi-core spreads to Bunds closed little changed.
• Thursday's schedule includes flash August PMIs and UK public finance data.

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is down 2.5bps at 1.933%, 5-Yr is down 3.3bps at 2.273%, 10-Yr is down 3.3bps at 2.717%, and 30-Yr is down 2.9bps at 3.294%.
• UK: The 2-Yr yield is down 5.8bps at 3.922%, 5-Yr is down 6.2bps at 4.076%, 10-Yr is down 6.8bps at 4.672%, and 30-Yr is down 7.1bps at 5.531%.
• Italian BTP spread up 0.3bps at 80.8bps /  French OAT up 1.2bps at 69.5bps

Robust Tsy quarterly futures roll volumes from September'25 to December'25 below. The 5Y roll currently leads as the pace rises slowly ahead the "First Notice" date on August 29. Current roll details:

• TUU5/TUZ5 appr 359,000 from -8.5 to -7.88, -8.38 last; 8% complete
• FVU5/FVZ5 appr 362,100 from -5.25 to -4.5, -5.0 last; 13% complete
• TYU5/TYZ5 appr 397,500 from -0.75 to +0.0, -0.75 last; 7% complete
• UXYU5/UXYZ5 under 187,700 from 0.0 to 1.0, 0.25 last; 4% complete
• USU5/USZ5 appr 131,700 from 12.5 to 13.75, 13.0 last; 11% complete
• WNU5/WNZ5 appr 93,200 from 8.0 to 8.5, 8.0 last; 5% complete
• Reminder, Sep futures don't expire until next month: 10s, 30s and Ultras on September 22, 2s and 5s on September 30. Meanwhile, Sep'25 Tsy options will expire this Friday, August 22.

A new YouGov survey has found: “Far more Americans disapprove than approve of how Trump is handling jobs and the economy (53% vs. 39%). This is a net approval on the issue of -14, the lowest net approval on the economy in Trump's second term. The -14 net approval on Trump's handling of jobs and the economy is also far worse than Trump received at any time during his first term.”

• The survey comes as Trump's trade agenda threatens to translate into higher prices for consumers. Axios writes: “The corporate price dam is cracking — companies are raising them, or signaling that increases are coming, to absorb some of the costs of the Trump administration's tariffs.”
• Despite Trump's weakness on the economy, Trump's overall approval rating has been holding steady for the past few weeks. Silver Bulletin writes: "213 days into Donald Trump’s second term. And as of today, 42.2 percent of Americans approve of the job Trump is doing and 52.3 percent disapprove. That’s a net approval rating of -8.1, which isn’t much different from where Trump has been over the past few weeks."

Figure 1: “Net approval of Donald Trump's handling of the economy in his first term and second term”

Source: YouGov