Flatter trend
May 28, 2025
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–Hard flattener Tuesday as Japan took steps to cap JGB long end. US 2y note down 2.3 bps to 3.962% (solid auction) and 30y down just under 10 bps to 4.938%, in a rejection (for now) of the October 2023 high of 5.115%. US 10y 4.432%, down 8. SOFR strip also dramatically flattening/inverting. New lows in many 1-yr calendars, with SFRZ5/Z6 down another 5 bps to -59 (9615, +0.5 & 9674, +5.5). On 12-May Z5/Z6 was -35.5. SOFR prices: SFRM5 9568, unch’d, M6 9656.5, +2.0, M7 9668.5 +7.5 and M8 9644.5, +8.0. The Fed is waiting for tariff clarity, but the back end of the SOFR curve is pretty sure inflation won’t be a problem and the central bank will be cutting.
–Five-year auction and FOMC minutes today. NVDA reports after the close. Headline on FT: McKinsey sheds 10% of staff. Yesterday IBM said to cut 8k, mostly in HR.
“In a recent interview, [IBM CEO Arvind Krishna] mentioned that AI is being adopted “very aggressively” to streamline enterprise workflows. Despite the cuts in some areas, he emphasized that IBM’s overall headcount has actually rose as savings from automation are being redirected into other functions like software development, marketing, and sales.” Smooth labor transition as repetitive jobs are replaced by technology? Hard data appears to be lacking (while the AI workers at BLS are having a smoke in the breakroom and swapping human jokes).
–Premium lower across the rate spectrum. On Friday, TYU 110^ settled 2’56 (110-04) while yesterday TYU5 110.5^ settled 2’48 ref 110-18. USU 111^ 5’58 on Friday and USU 113^ ref 112-18 was 5’36 yesterday.
