US: Trump's Approval Rating Ticks Up But Remains Drag On GOP Midterm Prospects

Hard to draw any strong conclusions over this morning's SOFR option flow. Underlying futures still bid - but well off morning highs. Projected rate pricing consolidates slightly from late Monday's hawkish view (*): Jun'26 at +.5bp (+1.4bp), Jul'26 at +2.1bp (+3bp), Sep'26 at +7.1bp (+8bp), Oct'26 at +10.6bp (+11.2bp), Dec'26 +17.6bp (+18.4bp).

• -5,000 SFRU6 96.37/96.50/96.75 2x3x1 broken put flys, 1.0/wings over
• +30,000 SFRU6 96.87/98.62 call spds, 1.25 ref 96.255
• -3,500 SFRZ6 95.86/96.12/96.37 iron flys, 19.25
• +3,000 SFRH7 96.25 calls, 22.0 vs. 96.07/0.40%
• +2,000 SFRV6 96.00 puts, 12.75 vs. 96.15/0.38%
• -2,000 SFRM6 96.37 calls, .25 ref 96.33
• +2,000 3QM6 96.12/96.25 put strip, 6.0 vs. 96.185/0.35%
• +5,000 SFRZ6 96.37/96.62/96.75 call flys, 0.5 ref 96.155

In her speech Greene presents a scenario between B and C which she dubs M (for Megan - before saying it isn't necessarily her central case). This includes additional second round effects relative to B. She also presents that hikes are likely necessarily under sceanario M. Again, this seems to be setting up for a vote for a hike.

• "I think it’s most likely that we’ll end up with second-round effects somewhere between Scenarios B and C: let’s call it Scenario M for Megan. To be clear, you should not interpret this as my central case just because I’ve named it after myself.... I do however believe it represents one reasonable interpretation of how the economy may evolve."
• "To generate Scenario M, we take the same energy paths underpinning Scenario B but incorporate the additional second-round effects channel reflecting the heightened sensitivity of long-run expectations from Scenario C. The resulting inflation path, relative to Scenario B, is entirely driven by the differences in how second-round-effects are modelled (Figure 16). Inflation in Scenario B returns to target by the end of the horizon, while it remains around 2 ½ % in Scenarios M and C."
• "For Scenario M, the endogenous path implies that more tightening would be required than is embodied in the market curve or Scenario B. This gives some indication of how policy might need to respond if greater second-round effects were to emerge given higher attentiveness by households and firms to rising inflation."

• EUR/USD: $1.1625-35(E2.4bln) $1.1700-01(E2.0bln), $1.1740-50(E1.6bln), $1.1850(E1.5bln)
• USD/JPY: Y159.75($1.2bln)
• AUD/USD: $0.7200(A$771mln)
• USD/CAD: C$1.3830($673mln)