REAL ESTATE: Places for People (NBHA: A3/A-/A-): Final £400 UKT+115

Heavier SOFR & Treasury option flow overnight, large risk Mar'25 10Y reversal taking advantage of the rally in underlying futures to hedge massive 108.5 call position build over the last couple weeks. Rally in underlying futures spurred by sell-off in tech sector on China's DeepSeek AI startup as competitor to varios US AIs. Bid sees projected rate cuts through mid-2025 gaining traction vs. late Friday (*) levels as follows: Jan'25 at -0.7bp (-0.1bp), Mar'25 at -9.7bp (-6.9bp), May'25 at -17.4bp (-13.6bp), Jun'25 at -31.1bp (-24.7bp), Jul'25 at -35.7bp (-28.6bp).

• Treasury Options:
  • Block/screen, +70,000 TYH5 108.5/110.5 put over risk reversals, 17 net vs.109-03/0.60% (+33k at 15/screen) reminder - nice hedge for some acct that bought some +75,000 TYH5 108.5 calls Friday at 41 ref 108-14.5, adding to +100k+ from 27-29 on Jan 14, just prior to CPI-tied bounce in underlying).
  • 1,500 USH5 107/109/111 put flys ref 114-17
  • 4,000 FVJ5 108 calls, 11.5 ref 106-22
  • 4,000 FVH5 106.5/107.5 call spds
  • 10,000 FVH5 107.5/108.5/109.5 call flys ref 106-17.5
  • +17,500 wk5 TY 110 calls, 6-10
  • 3,350 wk1 TY 107/107.5 put spds ref 109-03
• SOFR Options:
  • 5,700 SFRG5 95.68/95.75/95.81 put flys ref 95.805
  • 13,000 0QH5 95.50 puts ref 96.16
  • 2,000 0QH5 96.06/96.18/96.50 broken put flys ref 96.155
  • 4,000 SFRH5 95.87/95.93 call spds ref 95.815
  • Block/screen 6,000 SFRG5 95.68/95.75/95.81/95.87 put condors, 2.75-3.0
  • 3,000 SFRH5 95.68/95.75/95.81 put trees
  • +6,250 SFRH5 95.62/95.68/95.75 put flys, 2.25 ref 95.805
  • +5,000 SFRU5 96.25/96.62 call spds, 7.5 ref 96.065
  • 1,500 SFRZ5 96.00 puts ref 96.115
  • 1,500 SFRM5 96.12/96.37/96.68 broken call trees ref 95.955

Following are the proposed Instant Answers for the Bank of Canada interest-rate decision due Wed at 945am EST:

• Overnight Rate Target
• Does the Bank say it expects a more gradual approach to policy?
• Does the Bank say there are two-sided risks from any US tariffs?
• Does the Bank say that a key effect of US tariffs is likely to boost inflation?
• Does the Bank say that a key effect of US tariffs is likely to reduce economic growth?

• Despite a moderate stabilisation for major equity indices, the substantial losses and lower core yields on the session are limiting the ability for USDJPY to bounce, with the pair only managing a 154.23 high from the 153.72 lows at the early NY crossover.
• As noted, the USDJPY selloff picked up momentum following the clean trendline break, drawn from the September lows, bolstered by the breach of a cluster of lows just below the 155 handle.
• Barring a meaningful reversal, the pair looks set to close below its 50-day EMA, which intersects today at 155.15. This would represent the first close below this average since December 09, and is a meaningful bearish development technically. This paves the way for an extension towards 152.55, a Fibonacci retracement point, and 151.81, the Dec 12 low.
• Although last Friday’s BOJ meeting was met with limited lasting market reaction, analysts have noted the BoJ delivered a more hawkish message than expected, upgrading its inflation forecasts for FY2025 and emphasising confidence in the outlook that should allow for additional rate hikes. This could keep USDJPY on the backfoot ahead of this week’s FOMC meeting and press conference.