USDCAD TECHS: Trades Through The 20-Day EMA

• Treasuries look to finish near late session lows, curves twisting flatter (2s10s -4.983 at 28.720) with 2s through 10s underperforming in the aftermath of the first rate hike by the Fed since mid-2023.
• Adjusting for today's rate hike - projections vs. late Tuesday levels (*) show second hike is on for December: Oct'26 at +14.4bp (+35.3bp), Dec'26 +33.2bp (+52.6bp), Jan'27 +43bp (+61.1bp), Mar'27 +59.5bp
• Inflation has made too little progress for the Federal Reserve's comfort, explaining the central bank's decision to raise interest rates by a quarter point Wednesday, Fed Chairman Kevin Warsh said. "The plain fact is that inflation is too high, and has been for too long. This summer's inflation readings do not tell me that underlying trends have a meaningfully improved," Warsh said. He said too many categories in the inflation basket are still rising above 3%.
• The updated Dot Plot shows another 25bp hike is expected by 12 of 18 FOMC members (to a midpoint of 4.125%) with 4 seeing a third hike to 4.375%, and just two seeing rates remaining at their now-current midpoint of 3.875%. It's in line with the analyst consensus, though the distribution of dots looks very solid on a second hike to come by year-end.
• Earlier data: A much better-than-expected August retail sales report across the board after July's contractions, with total +1.2% (+0.8% expected, -0.5% prior) and Control Group +1.4% (+0.5% expected, -0.4% prior).
• Import prices were stronger than expected (0.7% M/M (nsa, cons 0.5)) and especially on an ex-petroleum basis in August, where industrial supplies and tech-driven capital goods inflation remains strong. That includes capital goods Y/Y inflation marking new multi-decade highs.
• Looking ahead: The focus now turns to New Zealand Q2 GDP data Thursday, before the BOE decision. US data includes Philly Fed manufacturing index, jobless claims and pending home sales. The BOJ decision is Friday.

SOFR & Treasury options trade outlined below: Heavy overall volumes by the close. Underlying futures mixed, curves twist flatter with the short end extending lows. Adjusting for today's rate hike - projections vs. late Tuesday levels (*) show second hike is on for December: Oct'26 at +14.4bp (+35.3bp), Dec'26 +33.2bp (+52.6bp), Jan'27 +43bp (+61.1bp), Mar'27 +59.5bp

• SOFR Options
  BLOCK: -40,000 SFRV6 95.68/95.87 put spds vs. SFRZ6 95.12/95.43/95.50/95.81 put condors, 1.5 net - Oct sold over
  -10,000 SFRZ6 95.75 puts, 11.5 ref 95.715
  +10,000 SFRZ6 95.62/95.75/96.06/96.18 put condors, 7.5 ref 95.74
  +10,000 SFRH7 95.62/95.87/96.12 call trees, 3.25 ref 95.51
  -20,000 SFRZ6 95.43 puts, 2.5 ref 95.72
  -3,000 SFRZ6 96.12/96.31/96.50 put flys, 0.75 ref 95.77
  -3,000 SFRH7 95.37 puts, 14.75 ref 95.555
  +4,000 OQV6 95.18/95.68 strangle, 9.5 ref 95.445
  +4,000 SFRH7 95.62/95.87/96.00 call trees, 1.0 ref 95.565
  +5,000 SFRX6/SFRZ6 96.00/96.06 cal lspd spd, 0.5
  +10,000 SFRV6 97.00 calls, cab
  +2,000 SFRG7 95.50 straddles, 43.25 vs. 95.55/0.08%
  -2,000 3QH7 95.00 puts, 9.5 vs. 95.51/0.20%
  10,800 SFRM7 97.75 calls, 2.5
  -5,000 2QZ6 95.50 puts, 20.5 vs. 95.475/0.50%
  +2,000 OQZ6 95.62/95.87 call spds, 6.75 ref 95.405
  +3,000 SFRX6 95.43/95.50/95.56/95.62 put condor, 1.0 ref 95.775
  -5,000 2QZ6 95.50 puts, 20.5 vs. 95.475/0.50%
  Block, -4,250 SFRZ6 95.75/96.00/96.25 put flys, 6.0 ref 95.745
  1,500 SFRH7 95.50/95.75 put spds vs. 96.00/96.25 call spds ref 95.55
  Block, 3,000 SFRZ7 98.50 calls, 2.5 vs. 94.455/0.20%
  -2,500 0QZ6 94.75/95.25/95.75 put flys, 16.5 ref 95.39
  2,000 2QM7 95.50 straddles vs. 95.00 put, 49 net
  2,000 SFRV6 95.56/96.18 strangles, 2.5
  +2,000 SFRZ6 95.56/95.75 put spds, 6.75
  -7,500 SFRV6 95.56/96.25 strangles, 2.5-2.0
  3,000 SFRV6 95.62 puts vs. SFRZ6 95.50/95.56 put spds, cab net
  1,500 SFRV6 96.12/96.25/96.37 call trees, 0.5 ref 95.75
  +2,000 0QX6 95.50/95.75 call spds, 8 ref 95.385
• Treasury Options:
  Block: -65,000 TYX6 104 puts, 11 w/ -20,000 TYX 108 calls, 7 after the bell
  Block, -20,000 USZ6 105 puts, 101 vs. 107-09/0.32%
  Block: +65,000 TYX6 104 puts, 9 w/ +20,000 TYX 108 calls, 10 ref 106-06
  21,601 TYX6 104.5/107.5 2x1 strangles on screen, 13 net ref 106-05.5
  7,500 FVZ6 105.5 calls, 17 last
  13,000 FVX6 106.25/106.75 call spds ref 104-18
  -8,000 TYZ6 105/107 strangles, 107 vs. 105-30/0.02%
  +6,000 wk1 TY 106.5 calls, 21
  3,600 wk3 TY 107 calls, 2 ref 106-00 (exp 9/18)
  appr 8,500 wk3 TY 106.5 calls vs. TYV6 106 calls, 19 net TYV over
  over +5,600 FVV6 105.25 calls, 3.5 last ref 104-13.25
  1,800 TUV6 101.75 puts, 2.5 ref 102-02
  +20,000 FVV6 104.75/105.75 1x2 call spds, 8
  4,500 FVV6 103.5/103.75/104 put flys, 1.5
  5,000 FVV6 106.25 calls, .5 ref 104-12.5
  +2,000 TYZ6 106 calls, 62
  +2,000 TYV6 106.5/107/107.5 call flys, 4
  +2,000 TYV6 104.25/104.75 put spds 3 vs. 105-28.5/0.10%

-40,000 SFRV6 95.68/95.87 put spds vs. SFRZ6 95.12/95.43/95.50/95.81 put condors, 1.5 net - Oct sold over