Ease pushed back
July 7, 2025
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–NFP +147k (rate of 4.1%) was strong enough to disabuse the market of any thoughts of a near term ease. Weakest contract was SFRZ5 which plunged 13.5 bps to 9616.5. That price/yield of 3.835% is 50 bps lower than the current EFFR of 4.33% suggesting 2 eases by year end (FFF6 settled 9619 or 3.81%). But not at the July 30 meeting: FFQ5 settled 9568.5, around 5% odds. SFRZ5/SFRZ6 one-yr calendar posted a new low -65.5 (9616.6/9682.0). Curve flattened hard: Z5 -13.5 at 9616.5, Z6 -6.5 at 9682.0, Z7 -4.0 at 9665.5 and Z8 -3.5 at 9647.0.
–On the treasury curve 2s jumped 9.5 bps to 3.88% and 30s up just 3 to 4.851%.
–Passage of BBB didn’t appear to have much effect on Friday’s abbreviated session, though stocks are seeing small profit-taking. USU5 currently prints 113-30, just edging out Thursday’s low of 113-31. This week brings more tariff drama and auctions of 3, 10, 30 year paper beginning tomorrow. FOMC minutes Wednesday.
