US TSYS: Late SOFR/Treasury Auction Roundup
SOFR & Treasury option flow looks mixed by Tuesday's close, chunky vol buying in Tsy 10s ahead of Wednesday's FOMC policy annc. April Tsy options expire Friday. Underlying futures firmer after the bell, off late highs, curves flatter/off earlier highs. Projected rate cuts through mid-2025 steady to softer vs. morning levels (*) as follows: Mar'25 steady at -.2bp, May'25 at -5.4bp ( -6bp), Jun'25 at -18.2bp (-19.7bp), Jul'25 at -26.7bp (-28.7bp).
- SOFR Options:
- +5,000 SFRJ5 95.87/96.00/96.25 broken call flys 1.0 ref 95.87
- -5,000 SFRM5 95.68/95.81 put spds, 5.75 ref 95.87
- -4,000 0QM5 97.00/97.50 call spds w/ 0QU5 96.50/97.00 call spd strip, 18.0 total
- -5,000 0QJ5/2QJ5 9625 put spds, 1.5 Green Apr over
- -3,000 SFRH6 95.75/96.00/96.50/96.75 Iron Condor 16.25 ref 96.325
- +5,000 SFRM5 96.18/96.31/96.43/95.62 call condors, 0.5 ref 95.875
- +10,000 SFRJ5 95.68 puts, 0.5 ref 95.855/0.04%
- -3,000 SFRU5 96.00 puts, 15.5 vs. 96.08/0.42%
- 2,000 96.12/96.50/96.87 call flys
- 4,000 SFRU5 96.43 calls ref 96.095
- 1,730 SFRU5 SFRU5 95.81/95.93 put spds vs. 96.43/96.75 call spds ref 96.095
- 4,000 0QH6 97.00/97.50/98.00/98.50 call condors ref 96.385
- 3,000 SFRM5 95.62/95.75/95.81/95.87 broken put condors
- Treasury Options: (April options expire Friday)
- 4,000 TYJ5/TYK5 112 call spds, 23 ref 110-20
- 5,000 TYJ5 109 puts ref 110-21.5
- Block, +15,000 TYM5 107.5/113.5 strangles, 35 vs. 110-18.5/0.05%
- +9,000 TYM5 108/113 strangles, 45 vs. 110-19/0.05%
- +5,000 TYK5 112 calls, 25 vs. 110-18/0.28%
- 10,000 TYJ5 109 puts ref 110-19
- 7,000 TYK5 109/111 3x2 put spds ref 110-18 to -18.5
- over 5,100 TYJ5 111 calls, 11 last (2k vs Wed/wkly 10Y 111 calls)
- over 2,000 TYJ5 111.25/Wed/wkly 111.25 call spds call spd
- 1,000 Wed/wkly 10Y 111/111.25/111.5 call flys ref 110-20.5
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US TSYS: Yields Pull Back Again With Consumer Growth Story In Question
Treasuries outperformed global counterparts Friday, fully completing a reversal from a midweek selloff.
- A large miss in January retail sales (-0.9% M/M vs 0.7% prior, -0.2% consensus) represented the biggest sequential drop in 22 months, with a similarly weak "control group" figure leading to a 0.5pp downgrade to the Atlanta Fed's GDP nowcast (to 2.3% GDP growth in Q1, i.e. no acceleration from Q4).
- That was enough to see the 10Y Treasury yield drop 7bp in the subsequent half hour, continuing the downtrend seen beginning in the immediate aftermath of Wednesday's hot CPI release. 10Y yields dropped over 21bp from the Wednesday high to Thursday's low, ultimately ending a tumultuous week 1.5bp lower.
- Yields ticked a little higher in afternoon trade Friday but the curve leaned bull steeper on the day, with the belly outperforming: 2-Yr yield is down 4.6bps at 4.261%, 5-Yr is down 5.7bps at 4.3328%, 10-Yr is down 5.1bps at 4.4782%, and 30-Yr is down 3.9bps at 4.6982%.
- In futures: Mar 10-Yr futures (TY) up 9/32 at 109-08 (L: 108-26 / H: 109-15.5).
- Other data (industrial production mixed, import prices soft) had little lasting impact.
- The coming week’s data schedule is relatively light, due in part to Monday’s Presidents Day holiday (SIFMA recommends bond cash close, equities closed), with initial jobless claims, February prelim PMIs, and regional Fed manufacturing surveys among the highlights. Supply includes 20Y Bond and 30Y TIPS auctions.
- We also get plenty of Fed communications including the January meeting minutes, and speaking appearances by both doves (Gov Waller) and hawks (St Louis Pres Musalem).
USDCAD TECHS: Bear Cycle Extends
- RES 4: 1.4948 High Mar 2003
- RES 3: 1.4814 High Apr 2003
- RES 2: 1.4503/1.4793 High Fb 4 / 3 and key resistance
- RES 1: 1.4380 High Feb 10
- PRICE: 1.4175 @ 16:54 GMT Feb 14
- SUP 1: 1.4107 50.0% retracement of the Sep 25 ‘24 - Feb 3 bull cycle
- SUP 2: 1.4011 Low Dec 5 ‘24
- SUP 3: 1.3944 61.8% retracement of the Sep 25 ‘24 - Feb 3 bull cycle
- SUP 4: 1.3894 Low Nov 11 ‘24
USDCAD broke lower Thursday, breaking out of a tight trading range this week and remains soft. A key support at 1.4261, the Jan 20 low, has been cleared and this signals scope for an extension of the current bear cycle - a correction. Scope is seen for a move towards 1.4107, a Fibonacci retracement. Initial firm resistance to watch is 1.4380, the Feb 10 high. A break would highlight an early bullish reversal signal.
OPTIONS: Mixed SOFR Rates Trade To Cap Week
Friday's US rates/bond options flow included:
- SFRH5 95.62p, traded half in 2k.
- SFRH5 96.93c, traded 0.25 in 4k.
- SFRH5 95.75/95.62ps 1x2, Traded 3.75 in 3k.
- SFRK5 97.00c, traded for 0.75 and 1 in 3k.
- SFRU5 95.93/95.81/95.68p fly, traded 1 in 1.5k
- SFRU5 96.50c, traded for 6.5 in 1.5k.
- SFRU5 95.87^, traded for 36 in 5k.
- SFRJ5 95.87/95.75/95.68p fly 1x3x2 with SFRK5 95.81/95.68/95.62p ladder 1x3x2, bought for 10 in 2k.
- SFRM5 95.68p, sold at 2.5 in 10k.
- 0QH5 96.00c, bought for 13 in 3k.
- TYH5 107p, bought for 11 in 15k
- TYJ5 107p, bought for 11 in 17k total.
- TYJ5 107/106ps, bought for 7 in 15k total.
