A Fed cut solves EVERYTHING
August 5, 2025
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–Powerful rebound in stocks following Friday’s drubbing, with SPX +1.5% and Nasdaq Comp up almost 2%. Yields continued to ease, with tens down 2 bps to 4.198%. Open interest rose in TY a whopping 106k to 5.1m. SOFR contracts up 1.5 to 3 across the strip. New low in SFRU5/SFRZ5 to -34 (9695, +1.5/9629, +3.0) as Trump’s reshaping of the Fed is expected to spark easing on an updated timeline. FFV5 (Oct Fed Funds) settled +2.5 at 9591.5 or 24.5 bps above the current EFFR of 4.33% or 9567. FFV is pricing certainty of one cut of 25 at the Sept FOMC. One more piece of bad data will see that contract trade above 9600.
–Adding buyer of 50k TYU5 113c overed 112-025, 24d, paid 18. Settled 23 ref 112-12. Downside: +40k TY wk1 WED, (expires tomorrow) 112/111.75ps pay 3. Three-yr auction today, tens and thirties Wednesday and Thurs. Buyer 15k FVU5 109/108.25/107.5p fly cov 109-075, 14d, pay 12.5
–Palantir blew past expectations post-close. At the bell 160.66, now near 170. Huge revenue growth to $1 billion on the quarter, Market cap of $380b. So if revenue comes in at, let’s say, $6b a year, then price-to-sales is over 60. Seems reasonable….right? I guess a FF rate of 4.25% is really holding the ‘new economy’ back.
–Sr Loan Officer Survey by the Fed generally reflects tighter lending standards and weaker demand. Supports easing? ISM Services today expected 51.5 from 50.8.
https://www.federalreserve.gov/data/sloos/sloos-202507.htm
