Rattling
July 30, 2025
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–Perhaps the most important news from yesterday was Trump again giving Putin a 10 day ultimatum for a peace deal in Ukraine. Yields sank yesterday with tens down 9 bps to 4.328% (right at the current Fed Effective level). Peak SOFR contract is the 7th quarterly, SFRH7, which settled +7 at 9683.0, nearly 100 higher than SFRU5 at 9584.5. SOFR curve somewhat flatter: SFRU5 +1.0 to 9584.5, U6 +6.0 to 9671.5, U7 +7.5 to 9677.0, U8 +8.0 to 9656.0. Red pack to deferred contracts made new lows on spreads. 2/10 treasury spread at 45.7 is at recent low. Oil soared. At the 3:00pm rate futures settle, CLU5 was 69.45, +2.74, +4%. Russia earthquake swarm, nuclear related? (more below)
–It’s FOMC day, but there’s a lot of additional news as well. Quarterly Refunding Composition, Q2 GDP expected 2.6% with Core PCE Price 2.3%. MSFT and META after close.
–In March the Fed annouced that QT would go down to $5b for treasuries per month starting April, with MBS remaining at $35b. Possible changes today? Waller, who is likely to dissent in favor of an immediate ease, believes the Fed shouldn’t hold ANY MBS, but it’s still possible MBS roll-off will be adjusted down in a nod to Trump (to influence lower mortgage rates). Monday’s Treasury borrowing estimate of $1.01T likely to be followed by an announcement today of heavier t-bill issuance rather than long coupons, which fits price action yesterday. Treasury Gen’l Acct (TGA) is currently only $333B; I’m sure the admin will want to top that up closer to $1T well before midterm elections in order to buy support target spending on the nation’s priorities.
–There were a few chunky treasury option trades. First, I’ll note that TY open interest rose 95k, up nearly 2%, a sizable jump in front of big data. This is from prelim data, but OI across treasuries was up: TU +41k, FV +14k, UXY +5k, US +13k and WN +21k. Suggests new buying rather than short covers.
A few option trades:
+50,000 wk5 TY Thursday 110.75 puts, 3 – expire 7/31 – day after FOMC.
+8k USU5 110 puts cov 114-21, 11
+20,000 FVU5 108 puts, 14 (new)
+20,000 TYU5 108.5 puts, 3 (exit)
+23,000 TYU5 112.5 calls, 15 (settle 16 ref 111-115, new)
–I have never seen a swarm of earthquakes like this on the USGS page. The Daily Express suggests a “botched” nuclear weapon test. I don’t like the sound of that…
https://earthquake.usgs.gov/earthquakes/map/?extent=2.28455,-249.78516&extent=70.84467,-32.51953
From an AI blog:
| DeepSeek rattled global markets in January by demonstrating that China could build competitive AI on a budget. Now, Beijing startup Z.ai is making DeepSeek look expensive. |
| … |
| Z.ai CEO Zhang Peng announced the pricing Monday at Shanghai’s World AI Conference, positioning GLM-4.5 as both cheaper and more efficient than its domestic rival. The model runs on just eight Nvidia H20 chips (half what DeepSeek requires) and operates under an “agentic” framework that breaks complex tasks into manageable steps. |
