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SOFR & Treasury options saw better call volumes overnight, latest 20k Sep'25 10Y 112 call appears to be a sale. Underlying futures weaker/near recent lows, curves mildly steeper (2s10s +0.736 at 52.02, 5s30s +0.730 at 103.183). Projected rate cut pricing cools vs. late Monday (*) levels: Jul'25 at -1.2bp, Sep'25 at -14.9bp (-15.5bp), Oct'25 at -27.7bp (-28.1bp), Dec'25 at -44.5bp (-45.7bp).

• SOFR Options:
  • Block/screen, 9,000 SFRV5 96.12/96.18/96.31/96.44 broken call condors, 0.5 vs. 96.06/0.05%
  • 2,000 SFRU5 95.81/95.87/96.00/96.06 call condors ref 95.83
  • +4,000 SFRZ5 96.12/96.37/96.62 call flys, 3.5 ref 96.10
• Treasury Options:
  • 20,300 TYU5 112 calls, 23 ref 111-02.5 (looks like sale hit large 23 bid)
  • -2,500 TYQ5 110.5/111 put spds, 8 ref 111-01.5
  • +3,700 TYU5 112.5 calls, 20 vs. 111-11/0.23% (-20k overnight)
  • 1,000 USU5 93/135 strangle ref 113-01
  • +3,000 TYU5 107 puts, 3 vs. 111-00/0.15%
  • +5,000 TYU5 109.5/110.5 put spd vs. 112.5 calls, 0.0 net
  • +3,000 TYQ5 111.5/112
  • -20,000 TYU5 112.5 calls, 17 early overnight ref 111-04

US Treasury Secretary Bessent speaks on Fox Business, stating that the White House is "about to announce a rash of trade deals within days"

• On China trade, the Treasury Secretary is more descriptive, noting that "we've moved to a new level" in China talks, and will be engaged in negotiations on Monday and Tuesday. He adds that the two sides will likely work out an extension of the deal, but wants China to "open up". He concludes by saying "if we can do more manufacturing, China does more consumption, that would be a home run.
• USD/CNH slips on the more positive rhetoric, to trade to new NY morning lows. Overnight lows at 7.1694 remain some way off, however.

• Similar bullish sentiment is seen in the crosses, with EURJPY and EURNZD recently extending their impressive rallies from the June lows to 6% and 4.5% respectively.
• Trepidation surrounding the Japanese election/fiscal outlook has contributed to the significant EURJPY upswing, and fresh cycle highs last week reinforce current conditions. Sights are on 173.43 (Jul 12 ‘24 high) before a key medium-term resistance level at 175.43, the July 11 ’24 high.
• Lower-than-expected New Zealand CPI on Monday has contributed to NZD underperformance this week, providing a noteworthy tailwind for EURNZD (below), which has risen to a fresh 3-month high above 1.9650 this morning. Moving average studies continue to support the cross well, signalling scope for an extension of the rally towards 1.9755 and 2.0011. Initial support at the 20-day EMA moves up to 1.9458.
• Fresh cycle highs last week maintain the price sequence of higher highs and higher lows for EURGBP, also highlighting a dominant uptrend. A resumption of gains would open key resistance at 0.8738, the 2025 high. Support to watch is 0.8620, the 20-day EMA.

Source: Bloomberg Finance L.P. / MNI