PERU: CPI Inflation Set To Fall Further In February

Steepener Block posted at 0737:00ET

• +5,000 FVH5 106-18, post-time offer vs.
• -3,000 TYH5 109-04, through 109-04.5 post time bid

Overnight option flow dominated by Mar'25 5Y skew play: buying over 80,000 put over risk reversals/covered, more than double the existing open interest in the two strikes. The combo covers a lot of data before expiring on Feb 21: today's FOMC obviously, next week's employment report, CPI and PPI. Underlying futures trading firmer, inside narrow range ahead of this afternoon's FOMC - steady rate annc expected. Projected rate cuts through mid-2025 laregely steady vs. late Tuesday (*) levels as follows: Jan'25 at -0.1bp, Mar'25 at -7.8bp, May'25 at -15.4bp, Jun'25 at -26.5bp, Jul'25 at -32.6bp (-32.1bp).

• Treasury Options:
  • Adds to Block: 36,000 FVH5 106/107.5 put over risk reversals
  • Block, +45,000 FVH5 106/107.5 put over risk reversals, 4.5 vs. 106-19.25//0.51%
  • 1,000 TYH5 107/107.5/108.5 1x3x2 broken put flys
  • +2,500 TYH5 103/104.5/107 broken put flys, 5 ref 109-06.5
  • 3,000 TYH5 106/107 put spds ref 109-07.5
  • -1,500 FVH5 107.75 calls, 7 vs. 106-19.25/0.17%
  • +3,500 TYH5 108 puts, 16 ref 109-07
  • -3,500 TYJ5 106 puts, 10 ref 109-05
• SOFR Options:
  • 1,500 SFRM5/SFRU5 95.75/96.06 call spd spd
  • 3,350 SFRN5 95.87/96.00/96.12 call flys ref 96.06

European Commission President Ursula von der Leyen and Executive Vice-President for Prosperity and Industrial Strategy Stéphane Séjourné are outlining the so-called 'Competition Compass', the Commission's roadmap for boosting EU competitiveness over the coming five years in the face of continued competition with China and a Trump administration in the US racing to cut red tape. Livestream here. 

• The Compass outlines three main aims:
  1. 'Closing the innovation gap' - boosting action in high-growth industries like AI, advanced materials, quantum, biotech, robotics and space technologies. Also simplify corporate law, insolvency, labour and tax law, and reduce the costs of failure to encourage investment.
  2. 'A joint roadmap for decarbonisation and competitiveness' - commitment to the Clean Industrial Deal that looks for 'a competitiveness-driven approach to decarbonisation,' put forward an 'Affordable Energy Action Plan will help bring down energy prices and costs'. Promises  'tailor-made action plans for energy intensive sectors, such as steel, metals, and chemicals,' to protect them during transition.
  3. 'Reducing excessive dependencies and increasing security.' - Clean Trade and Investment Partnerships to help secure supply of raw materials, clean energy, sustainable transport fuels, and clean tech from across the world. A review of the Public Procurement rules will allow for the introduction of a European preference in public procurement for critical sectors and technologies.
• A press release on the Compass is here. A factsheet here. The full 26-page document can be found here.