PBOC steps in front of the Fed
February 20, 2024
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–China cut its 5 year loan prime rate by 25 bps to 3.95%. However, US equity futures are moderately lower as of this writing on Tuesday morning.
–Friday featured continued buying of TYJ puts. TYJ 109.5/108.5ps settled 18 with open interest +15k in both strikes. Late buying of TYJ 106.5p and 106p for 6 and 5 (settlement prices), with open int +21k and +36k. On the day, April TY puts gained 131k contracts while March puts dropped 51k. March options expire Friday.
–SOFR contracts continue to be weighed down as Fed cuts drift further out of focus. Weakest contract on SOFR strip was SFRM5, down 10 at 9607. SFRM4 was -5 at 9495; buyer of 35k SFRM4 9493.75/9481.25/9468.75p fly for 3.25 to 3.5.
–New recent low in 2/10 at -36 bps, though it’s just around the 50% pullback from the Dec low of -53.5 to the Jan high -16.5.
