AUSSIE 10-YEAR TECHS: (H5) Reverses Off First Resistance

Services Momentum Continues To Ease 

PDF ANALYSIS HERE:  Jan2025EZCPIReview.pdf

• Although there was a small upward surprise to Eurozone headline and core inflation in the January flash round, the ECB will be encouraged by further moderations in core and services inflation momentum.
• There was early evidence that the so-called January price reset effect was smaller in 2025 than previous post-pandemic years, though NSA services inflation of -0.2% M/M was still stronger than what we’d typically see for a January in a pre-pandemic setting. More details of the underlying drivers will be available in the final HICP reading on Feb 24.
• The market reaction to the January flash inflation round was isolated to last Friday, following the softer-than-expected French and German state-level data.
• The ECB still needs to see its inflation confidence play out in the hard data, but the January flash round suggests markets and policymakers are right to focus more closely on the subdued growth outlook. At the time of writing, ECB-dated OIS price 85bps of cuts through the remainder of this year, with 62bps of easing priced through June. 

SOFR Option flow looked more pared in Tuesday's second half as trading accounts turned attention to Wednesday morning's ADP and Friday's headline employment data for January. Underlying futures have see-sawed moderately higher, at/near the top end of the session range. Projected rate cuts through mid-2025 gain slightly vs. this morning's levels (*) as follows: Mar'25 at -3.7bp (-3.5bp), May'25 at -11bp (-9.8bp), Jun'25 at -21.0bp (-19.5), Jul'25 at -26.9bp (-24.9bp).

• SOFR Options:
  • +10,000 SFRJ5 95.75 puts 2.0 ref 95.89
  • +5,000 SFRU5 97.00/97.50 call spds, 2.0 vs. 95.99/0.06%
  • +10,000 0QU5 96.50/97.00 call spd vs 3QU5 96.37/96.87 call spd spd, 0.5 net
  • +5,000 SFRZ5 95.50 puts, 9.5 vs. 96.06/0.24%
  • -5,000 SFRZ5 95.37/96.62 strangle, 23.0 96.07
  • -10,000 SFRJ5 95.87/96.12/96.37 call flys, 4.0-3.75 ref 95.89
  • -15,000 0QK5 95.25/95.50 put spds, 2.5 ref 96.09
  • +5,000 SFRJ5 95.75 puts 2 ref 95.885
  • Update, over +30,000 SFRM5 95.81/95.93/96.00 broken call flys, 3.25 last ref 95.855
  • +15,000 SFRZ5 97.00 0QZ5 97.50 call spds 3.5 steepener
  • -4,000 SFRM5 95.75/95.87 put spds 2.75 over SFRJ5 95.68/95.81 put spds
  • +2,500 SFRZ5 95.50 puts, 10.5 vs. 96.015/0.24%
  • -2,500 SFRZ5 96.00/96.50/97.00 call fly w/ 95.00/95.50/96.00/96.60 put condor, 35.25 total ref 96.02
  • +2,000 0QG5 96.00/3QG5 95.87 put spds, 0.0 flattener
  • +10,000 SFRH5 96.25 calls vs -5,000 SFRK5 97.00 calls, 0.25 net
  • 3,800 0QH5 95.75/95.87/96.00 put trees ref 96.06
  • 4,000 SFRM5 96.00/96.12/96.25 call flys ref 95.87 to -.875
  • over +25,000 SFRJ5 95.62/95.68/95.75 put flys, 1.25
  • 5,000 SFRJ5 95.68/95.75/95.81/95.87 put condors
  • 2,000 SFRZ5 96.50/96.75/97.00/97.25 call condors ref 96.035
• Treasury Options:
  • -10,000 TYH5 108.75 straddles, 115-114
  • +5,000 USH5 110 puts, 9
  • +9,000 wk1 US 115 calls, 3
  • over 14,000 TYH5 107 puts, 7 last
  • 2,000 TYH 107.5/108 put spds
  • over 10,200 TYH5 108 puts, 19 last
  • over 13,000 USH5 110 puts, 9-11 ref 113-23
  • over 7,400 USH5 112 puts, 31-32
  • 1,500 TYH5 110.5/111.5 call spds ref 108-25
  • 2,100 FVH5 105/106 put spds ref 106-11.25
  • 2,000 wk2 US 111/112 put spds ref 114-01 (exp Feb 14)

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