CONSUMER CYCLICALS: Manpower; 1Q (to March) results (x2)

Option desks mixed SOFR & Treasury option flow overnight, lighter volumes so far, April Tsy options expire Friday. Underlying futures hold to narrow range, curves recovering slightly from Monday's flattening. Projected rate cuts through mid-2025 largely steady vs. late Monday levels (*) as follows: Mar'25 steady at -.2bp, May'25 steady at -6bp, Jun'25 at -19.7bp (-19.5bp), Jul'25 at -28.7bp (-28.5bp).

• SOFR Options:
  • 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)
  • 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

Senate Budget Committee Republicans will meet the Senate Parliamentarian in the coming weeks for a preliminary assessment on using a “current policy baseline” to cost making permanent Trump’s 2017 tax cuts (TCJA) at $0. Without the Parliamentarian’s approval, the GOP 'megabill' will be ineligible for reconciliation - the procedure to bypass the Senate filibuster. 

• The move is untested in reconciliation but crucial to President Trump’s expansive tax agenda. Using the CBO's preferred “current law baseline”, TCJA renewal will cost ~USD$4.5 trillion, leaving little headroom for eliminating taxes on tipped earnings/social security payments/overtime pay while keeping safety net programmes like Medicaid intact.
• Punchbowl notes that Parliamentarian Elizabeth MacDonough, “won’t give ironclad rulings at this stage [but the GOP] can get an informal sense of how she views different options.”
• The Hill reports that Senators Ron Johnson (R-WI) and Steve Daines (R-MT) confirmed that Trump is on board with the "current policy" strategy. However House Ways and Means chair Jason Smith (R-MO) and Budget chair Jodey Arrington (R-TX) said in a statement: “A handful of fiscal conservatives in the House have expressed reservations ... calling it a gimmick that obscures the deficit impact of the reconciliation bill,”
• House Speaker Mike Johnson (R-LA) is eying a vote on the reconciliation package by Easter, leaving little time to draft the complex package and whip support. As always, Johnson will face an unruly conference. In addition to concerns among fiscal conservatives, defence hawks are calling for a steep increase in defence spending to cover shortfalls from short-term funding bills and moderates are calling for Medicaid protection.