US OUTLOOK/OPINION: Citi Firmly Below Payrolls Consensus

• As before though, questions remain about the ECB’s seasonal adjustment process and whether it leaves any residual seasonality in services momentum.
• This 3M/3M annualized pace had slowed to as low as 2.6% in January but has since accelerated to 3.2% in February, in a move reminiscent of the turn of the year decline and then (early days) subsequent acceleration into the spring of 2024.
• As such, there is likely to be at least some trepidation in putting too much weight on what are, for now, still softer momentum measures than the Y/Y rates.
• For a more detailed review of the latest inflation data, see the MNI Eurozone Inflation Insight here.

• We have received full HICP details for January and preliminary details for February since the January 30 decision.
• Most recently, headline HICP didn’t quite moderate as much as expected but still eased a tenth to 2.4% Y/Y for back to where it was ahead of the January meeting, whilst core HICP also eased a little less than expected to 2.6% Y/Y but still below the 2.7% seen in December and also notched its lowest since Jan 2022.
• Considering the weight that has been placed by ECB officials on services inflation, it was notable that it slowed to 3.7% Y/Y (vs limited analyst consensus of 3.8% seen before any of the regional data) for joint lows since June 2022. 

Heavy SOFR and Treasury option volume on the day, leaning towards low delta puts well before the reversal in bonds to near session lows late. Projected rate cuts through mid-2025 gaining vs. late Monday levels (*) as follows: Mar'25 at -1.8bp (-3.1bp), May'25 at -12.2bp (-14bp), Jun'25 at -28.9bp (-31.0bp), Jul'25 at -38.8bp (-42.6bp).

• SOFR Options:
  • 16,000 SFRJ5 95.62/95.68 put spds, cab
  • -10,000 SFRU5 96.25 calls, 27.0 vs. 96.265/0.50%
  • Block, 17,500 SFRZ5 96.12/96.50 3x2 put spds, 18.5 net ref 96.44 to -.435
  • -5,000 SFRZ5 96.50/97.00 call spds, 14.5 ref 96.475
  • Block, 15,000 0QM5 97.00/97.50 call spds 7.5 (scree/pit total over -50k)
  • +10,000 0QM5 97.00/97.50 call spds, 7.5 ref 96.01
  • +5,000 SFRZ5 96.00 puts, 15.5
  • -3,000 SFRZ5 96.43 straddles, 72.0 ref 96.415
  • +5,000 SFRU5 97.00 calls 11.0 ref 96.275
  • -5,000 SFRJ5 96.12/96.37 call spds, 3.75 ref 96.005
  • +20,000 0QM5 97.00/97.50 call spds, 7.25 ref 96.565
  • -30,000 0QM5 95.12/95.50 put spds .75 vs. 96.545 to -.535/0.06%
  • -10,000 SFRN5 95.56/95.75/95.93 put flys, 4. ref 96.26
  • -5,000 SFRZ5 96.25/96.50 call spds, 10.0 ref 96.41
  • -20,000 SFRZ5 96.25/96.75/97.25 call flys, 7.5 ref 96.41
  • Block, 6,000 0QM5 96.75/97.25 call spds vs. 3QM5 96.62/97.12 call spds, 0.0
  • Block, 4,000 96.62/96.75 call spds 4.5 vs. 96.59/0.08%
  • over 7,600 0QM5 97.25/97.50 call spds ref 96.535
  • over 38,900 SFRZ5 95.62 puts - partly tied to flys/condors below
  • 5,000 SFRZ5 95.37/95.62/95.87/96.12 put condors
  • 7,350 SFRZ5 95.12/95.62/96.12 put flys ref 96.385
  • over 10,000 0QH5 96.50 calls ref 96.475
  • 5,000 0QM5 97.25/97.50 call spds ref 96.52
  • +4,000 SFRZ5 96.00/96.25 put spds, 11.5 ref 96.385
  • +4,000 SFRZ5 96.50 calls, 30.0 ref 96.38
  • 4,800 SFRZ5 95.93/96.12 put spds ref 96.38
  • 5,000 SFRH5 95.75/95.87 call spds
  • 5,000 2QH5 96.25/96.37 put spds ref 96.51
  • Block, 3,716 SFRM5 96.00/96.25 call spds, 6.0 ref 95.99
• Treasury Options:
  • Block -16,000 TYK5 112.5 calls, 41 vs. 111-09/0.20% vs. +17,500 wk4 TY 114 calls, 8
  • Block -16,000 TYK5 112.5 calls, 47 vs. 111-20/0.20% vs. +17,000 wk4 TY 114 calls, 9
  • -3,000 TYM5 111.5 straddles, 248
  • +10,000 TYK 110.5 puts, 40
  • -20,000 TYJ5 109 puts, 3.0 vs. 111-25.5 to -26/0.06%
  • 5,000 TYJ 107/108 put spds, 0.5 ref 111-21
  • 2,500 FVK5 110/112 call spds
  • -12,000 wk1 TY 111/112.5/113.5 broken call flys, 2 ref 111-22, exp this Friday
  • 24,800 TYJ5 109.5 puts, 6, total volume over 42,600
  • over 8,700 USJ5 117.5 puts, 45 last
  • over 8,000 USJ5 119.5 calls, 1-10 last
  • 9,100 TYJ5 107/108 put spds ref 111-18
  • 3,000 TYJ5 109/109.5 3x2 put spds ref 111-18 to -18.5
  • 3,125 FVJ5 107.25 puts ref 108-09.25