IRAN: State Of Play In Hormuz Remains Unclear Headed Into Weekend

SOFR/Treasury options saw better downside puts with some decent call unwinds on net - well before underlying rates extended lows post-FOMC presser. Projected rate cut pricing much cooler vs. late Tuesday lvls (*): Apr'26 -.5bp (-1.1bp), Jun'26 at -2bp (-5.6bp), Jul'26 at -5.5bp (-10.6bp), Sep'26 at -9.3bp (-16.7bp), Oct'26 -11.5bp (-20.1bp). The first 25bp rate cut back out to July 2027.

• SOFR Options:
  • +4,000 0QQ6 96.43/96.62 put spds, 7.5
  • 6,000 SFRK6 96.37/96.43/96.50/96.56 call condor vs. 96.25/96.31 put spds, 0.0 net
  • +20,000 SFRK6 96.68/96.87 call spds, 0.5
  • -40,000 SFRU6 97.25/98.50 call spds, 2.5-2.75 ref 96.455
  • +6,000 SFRM6 96.37/96.43/96.50 call flys, cab
  • 1,500 SFRJ6 96.56 calls, 1.0 ref 96.375
  • over 3,300 0QZ6 97.87 calls, 7.0 ref 96.73
  • 1,000 SFRK6 96.43/96.50/96.56 put fly vs. SFRM6 96.37/96.43/96.50/96.56 put condors ref 96.38
  • 2,000 SFRZ6 96.87/97.12 call spds, 4.25 vs. 96.575/0.09%
  • +1,500 SFRZ6 95.75/96.00/96.25 put flys, 1.75
  • -3,000 SFRU6 96.31 puts, 8.0
  • BLOCK, 2,500 0QM6 96.12/96.25 put spds, 2.0 ref 96.675
  • 1,750 SFRJ6 96.37/96.43 call spds ref 96.375
  • -2,000 SFRM6 96.31/96.37 put spds, 3.5
• Treasury Options:
  • -15,000 TUM6 104/104.25/104.5/104.75 call condors, 3.5
  • Block, 8,880 USJ6 109 puts, 3 vs. 114-14/0.03
  • 3,000 FVM6 108.75/109.75/110.25 1x3x2 call flys, 9.5 net
  • over 10,000 FVM6 108.25 puts, 31 last ref 108-21.75
  • 3,000 TYM6 109/111 put spds ref 111-27 to -27.5
  • +10,000 TYK6 110 puts, 16 
  • +10,000 TYM6 110 puts, 27 
  • over 10,000 USJ6 113/114 put spds, 12
  • over 8,200 TYM6 111 puts, 38 ref 111-31.
  • 2,000 TYK6 111/113 strangles, 47 ref 112-01.5
  • -1,500 TYJ6 111.25 straddles, 106 vs. 112-05/0.62%
  • 4,000 Wednesday wkly 111.5 puts, cab-7 ref 112-04 (exp today)
  • 3,000 TYK6 109.5/110.5/111.5 put trees, 7 vs 112-01/0.05%
  • 4,000 FVM6 108.25 puts ref 108-30.25
  • over 5,100 wk3 TY 112.25 calls, 12-10
  • +10,000 wk3 TY 111/111.5 put spds, 2 ref 112-05 (exp Fri)

• Weaker risk sentiment on Wednesday is providing a supportive tone for the US dollar, a theme that has extended as the market digests the Fed decision and press conference and as we approach the APAC crossover. The DXY is 0.5% higher in sympathy, reestablishing itself back above the psychological 100 mark. Focus remains on a cluster of resistance at 100.50 for the next leg higher for the dollar.
• Dampened enthusiasm in the equity space is weighing on the likes of AUD, NZD and SEK, while the Swiss Franc has also been a notable underperformer, of note given tomorrow’s SNB decision.
• USDCHF has risen to a fresh recovery high of 0.7926, while EURCHF has now extended its bounce from 0.8981 cycle lows to over 1%. Most recent price action has seen EURCHF accelerate on a break of its 20-day EMA, which had acted as good resistance since mid-Jan. Further strength would focus in on the 50-day at 0.9142.
• In the majors, EURUSD is back below the prior breakdown point at 1.15 and continues to reflect the sentiment in energy markets, with participants keeping a close eye on the 1.1411 bear trigger and 1.1392, the Aug 01 low.
• USDJPY has risen to a fresh cycle high above 159.75 before the BOJ meeting. While markets price around a 60% chance of an April hike, external factors are amplifying the uncertainty over the tightening timeline, keeping focus on the Thursday decision and accompanying remarks from Governor Ueda. 160.26 and 161.95 remain the key levels for USDJPY above the psychological 160 mark.
• As well as BOJ and SNB decisions, the Riksbank, BOE and ECB rate setting meetings are all scheduled on Thursday. New Zealand GDP and Australian employment data are also due.

• Stocks continued to trade weaker late Wednesday, extending lows after the FOMC held rates steady while the Fed chair expressed oil shocks multiple times and the uncertainty it injects to forward guidance.
• Stocks retreated to the lowest levels of the week (the DJIA back to late November levels) after higher than expected PPI inflation metrics, coupled with reports that several Iranian gas fields were attacked by Israel which sapped risk sentiment as crude prices surged (WTI crude neared $100/bbl).
• Consumer Staples/Discretionary, Materials and Health Care sector shares continued to underperform.
• Despite the rise in geo-political risk, mining stocks weighed on the Materials sector as gold prices tumbled over $150 by the second half, Newmont Corp and Freeport-McMoRan trade -3-3.5% lower.
• The Health Care sector was driven by carry-over weakness in pharmaceutical shares as obesity drug expectations continued to be discounted by analysts, AbbVie down approximately 5.3%.
• Consumer stocks depressed as core PPI (ex food, energy & trade services) printed 0.53% M/M: Dollar Tree, Monster Beverage Corp, Philip Morris International and Dollar General Corp all trade -3.5 to 4.3% lower.
• On the flipside, as has been the case since the start of the war between the US/Israel and Iran - oil and gas stocks outperformed.