FED FUNDS FUTURES: BLOCK: Large Jan'25 Fed Fund Cross

Option desks reported better SOFR and Treasury put options on net overnight. Underlying futures weaker, near recent lows. Dec24 not fully pricing another 25bp cut: Projected rate cuts into early 2025 compared to early Monday levels (*): Dec'24 cumulative -17.2bp (-16.3bp), Jan'25 -25.2bp (-24.3bp), Mar'25 -38.2bp (-37.6bp), May'25 -44.3bp (-45.0bp).

• SOFR Options:
• 9,750 SFRX4/SFRZ4 95.68 put calendar spd
• 4,000 2QM5 96.87/97.37 call spds ref 96.195
• Block/screen, 5,800 SFRX4 95.25/95.37/95.50 put flys, ref 95.565
• 1,500 0QZ4 96.00/96.25/96.50 2x1x1 put trees
• Block, 10,000 SFRZ4 95.37/95.43/95.50/95.62 broken put condors, 4.5 ref 95.57
• 3,400 SFRZ4 95.56/95.62/95.68 put flys, ref 95.565 to -.57
• Treasury Options:
• 2,000 USF5 115/116 put spds vs. 118/119 call spds ref 117-22
• 20,000 TYF5 108/109 put spds, 21 ref 110-00.5

ING note that “Dutch pension funds are considering adjusting pension payments to match inflation, potentially leading to near-term demand for fixed receiver swaps, albeit less than usual.”

• They see “a shift in demand from long-dated (30-Year) fixed receiver swaps to shorter-dated (<20-Year) swaps in the period leading up to the pension reforms (most of the Dutch pension funds intend to transition from a defined benefits system to a defined contributions system by early 2026 or early 2027).”

The latest opinion polling from Ifop shows President Emmanuel Macron's approval rating hitting a six-year low, with just 25% of respondents saying the president is doing a good job. This is the lowest approval for Macron in any Ifop poll since December 2018, when the anti-gov't 'yellow vest' protests were sweeping across the country. 

• The low approval rating for Macron may not initially be seen as important, given he cannot run for office in 2027. However, given the dysfunction in a National Assembly divided three ways between the left, centre, and right, the unpopularity of the president is likely to impact on support for the centrist alliance of parties (Ensemble) supportive of his presidency. Another legislative election cannot take place before June 2025, but given the minority status of the Barnier gov't a confidence vote bringing down the gov't is a likely event next summer.
• A public increasingly disenchanted with the Macron presidency could turn on the centrist parties come any snap election, risking the 'Republican front' that denied the far-right Rassemblement National a majority in the July legislative election.
• The November Ifop poll also shows approval for PM Michel Barnier standing at 40% amid the prolonged efforts by his minority gov't to get a budget through parliament. Barnier's predecessor, Gabriel Attal, never fell below 41% approval in any Ifop poll during his short tenure at Matignon.  

Chart 1. Approval and Disapproval Ratings for President Emmanuel Macron, %

Source: Ifop