Massive SOFR call buying
February 18, 2026
*******************
–Massive buying of SOFR calls on Tuesday, primarily the 9800 strike. These are all new positions:
+45k SFRU6 9800c cov 9680.5, paid 4.5. Settled 4.5 vs 9679
+125k SFRZ6 9800c cov 9696 and then 91.5, paid 7 and 7.5. Settled 7.5 vs 9692
+40k 0QM6 9750/9800cs 4.0, settled 3.75 vs 9697
+50k 0QU6 9800c cov 93.5 to 96, paid 6 to 6.5. Settled 6.25 vs 9695
+50k 0QZ6 9800c 7.5 to 8.0. Settled 7.75 vs 9691
In treasuries there was a late roll -TYK6 114c vs +TYM6 115c, sold 50k May at 4 over covered TYH6 113-03. Settles 34 and 29. Since November this 50k clip buyer has targeted 113.5 and 114 calls, so the move to 115 strike is of some interest.
–Given the FOMC schedule and uncertainty regarding Warsh’s confirmation, it makes sense to go out past the July 29 FOMC. The 0QM 9750/9800cs is also reasonable if economic conditions deteriorate, though expiration is June 12 and the FOMC is 17-June.
–Curve flatter, with new recent low in 2/10 at 61.5. 2y +2.5 bps to 3.437 while 10y fell 0.6 bp to 4.052%.
–One other note worth mention in SOFR: Last Friday there was a seller of 50k SFRU6/Z6 at -11.5, which has caused that spread to edge lower, now -13.0. Yesterday SFRZ6/SFRZ7 one-yr calendar fell 3 bps to +1.0 (9692 -4 and 9691 -1). As recently as Feb 9 this spread was +12.5. Also, the peak SOFR contract has moved out one slot to SFRM7 at 9697. The market expects easing of course, but is pushing the timing out a little further.
–Housing Starts, 20y treasury auction and Fed minutes today.
