AUDUSD TECHS: Monitoring Support

Heavier SOFR & Treasury option trade remained mixed Wednesday, underlying futures near post-CPI lows while projected rate cuts through mid-2025 continue to recede vs. this morning's pre-CPI levels (*) as follows: Mar'25 at -0.5bp (-0.7bp), May'25 at -3.2bp (-6.3bp), Jun'25 at -9.1bp (-13.9bp), Jul'25 at -12.6bp (-18.9bp).

• SOFR Options:
  • 18,000 SFRU5 95.37/95.62 put spds, 3.5
  • +6,000 2QM5 95.25 puts w/ 3QM5 95.25 put strip covered 13.0
  • +10,000 SFRZ5 96.12/96.37 call spds, 6.0 ref 95.905/0.10%
  • -5,000 SFRZ5 95.00 puts, 5.0 ref 95.89
  • +5,000 0QZ5 96.25/96.75/97.25/97.75 call condors, 10.0 vs 95.92
  • +5,000 SFRN5 95.75/95.87/96.00 put flys, 1.0 ref 95.83
  • +3,000 SFRK5 95.81/95.93/96.00/96.12 call condors 1.5 ref 95.755
  • +10,000 0QU5 97.12 calls 5.5 vs. 95.965/0.10
  • +5,000 SFRJ5 95.62/95.68/95.75 put trees, 2.75 ref 9576
  • -2,000 0QU5/3QU5 95.25 put spds, 2.0 net
  • +5,000 0QU5 97.12 calls 5.0 ref 95.935
  • +4,000 0QH5 95.81/95.93/97.06 put flys 2.5 ref 95.925
  • +4,000 0QH5 96.37/96.43 1x2 call spds, 1.25, 2 legs over ref 96.025
  • 4,000 0QJ5 95.43/95.50 2x1 put spds ref 96.03
  • 10,000 SFRZ5 95.37/95.50 put spds ref 95.975 to -.97
  • 2,000 0QG5 95.81/95.93/96.06 put flys ref 96.01
  • Block, 2,500 SFRJ5 95.62/95.75 put spds ref 95.805
  • 11,500 SFRZ5 96.00 calls
  • 4,100 SFRM5 95.00/95.56/95.62 broken put trees ref 95.81
  • 4,000 SFRM5 95.75/96.00 call spds ref 95.81
  • 5,000 SFRZ5 96.18/97.18 call spds ref 95.975
  • 3,500 SFRH5 96.00 calls, 0.5
  • 2,900 SFRG5 95.68 puts, 0.5
• Treasury Options:
  • Block: +10,000 TYJ5 109/110/110.5 broken call flys, 12 vs. 108-09/0.10%
  • Update +20,000 TYH5 107/107.5 2x1 put spds, 2
  • -10,000 TYH5 108 puts, 19
  • -7,500 FNH5 105.5 puts, 5.5
  • -3,000 TYK5 108 straddles, 214 (appr vol 5.81%)
  • +14,400 TYJ5 106.5 puts, 15
  • 2,000 TYJ5 108 straddles
  • 3,800 FVK5 109 calls vs. 105.75/106.5 put spds
  • -30,000 TYH5 109 puts, 43-45 unwind
  • 2,400 FVJ5 105/106 put spds vs. 107.25 calls ref 106-12
  • 8,000 TYH5 106/107 put spds ref 108-28 to -28.5
  • 2,000 USJ5 108 puts, 8 ref 114-18
  • 5,800 TYH5 107.5 puts, 3 ref 108-29.5
  • 30,000 TYH5 110.5 calls, 3 total volume over 33k
  • over 18,600 TYH5108.5 puts, 14 last
  • over 6,000 TYH5 110 calls, 5 ref 108-29

• We touched earlier upon the outsized strength in recreation services, on its own adding 0.06pps to core CPI and helping our collection of “other services” (items within core services beyond housing, lodging, medical services, car insurance and airfares) add 0.15pp to core CPI after just 0.02pp. There has only been one month with a stronger contribution - Jun 2022 - since this calculated series started in 2012.
• It came as recreation services increased a seasonally adjusted 1.4% M/M, helped by video and audio services jumping 2.0% M/M sa for its highest on record (back to 2010) but also ‘other recreation’ services increasing a rapid 1.5% M/M sa with its weight 2.5x that of video and audio services.
• As such, the video & audio services contribution to M/M core CPI only increased from 0.07pp to 0.20pp but the sheer magnitude of the acceleration is nevertheless worth noting.
• In non-seasonally adjusted terms, recreation services increased 1.6% M/M as video and audio services jumped 2.2% M/M. The latter is far stronger than normal with a January average since 2017 of 0.5% (range -0.3% to 0.9%) and with February typically seeing a heavier increase with an average of 1.1% - see chart.
• Particularly aggressive start-of-year price increases are naturally floated as a reason for this although the sector naturally doesn’t lend itself well to the argument that tariff anticipation is at hand. Some anecdotal evidence likely at least partly at play is the Netflix price hike amounting to 14-16% depending on subscription type after no price hikes in 2024. That said, whilst it was announced Jan 21, it’s not that clear cut as it was due to come into effect at the subscriber’s next billing cycle so the impact will likely be spread over Jan and Feb.
• Whilst the seasonal adjustment process itself is naturally under scrutiny to see how it handles start-of-year price increases, the translation from 2.2% M/M nsa to 2.0% M/M sa looks small considering the unprecedented nature of the 2.2% increase for a January but the adjustment factors themselves don’t untoward compared to recent years.
• To be clear though, this is only a small part of the overall acceleration in recreation services and core services more generally but it’s an important example of the frothiness seen in price setting at the start of the year.   

• +10,000 TUH5 102-17.88, post time offer at 1456:35ET, DV01 $369,000. The 2Y contract trades 102-17.75 last (-4.62).