STIR: Dovish Drift In Fed Pricing On Broader Risk-Off, Over 85bp Cuts Thru Dec

• GBP 562.500mln had been on offer.
• This leaves GBP 28.908bln of the gilt in issue.

SFIM5 96.15/96.45 call spread 30K given at 1.25

SOFR and Treasury options leaning towards low delta put structures overnight (aside from some SOFR midcurve call plays), picking up cheaper downside insurance as underlying futures continue to gain. Projected rate cuts through mid-2025 gaining vs. late Monday levels (*) as follows: Mar'25 at -3.1bp (-1.8bp), May'25 at -14.0bp (-10.2bp), Jun'25 at -31.0bp (-26.0bp), Jul'25 at -42.6bp (-35.3bp).

• SOFR Options:
  • 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:
  • -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