Quick notes. NFP seals ease.
September 8, 2025
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–Weak employment report (22k NFP and 4.3% rate) removed any doubts of an ease next week, and caused some to speculate on 50 bps. SOFR curve steepened. SFRH6 was the strongest contract, +11.5 to 9663.0. H7 (peak contract on strip) +6.0 to 9713, H8 +5.0 to 9697.5 and H9 +6 to 9677. By the way, the SFRH6 price of 9663 equates to 3.37%, almost 100 bps lower than the current EFFR of 4.33%. Pricing is NOT telegraghing a series of powerful rate cuts. The fact that spreads like 2/10 didn’t press to new highs (ended at 57.5, down 0.7) is another signal that easing bets are more circumspect in terms of magnitude and timing. Ten year yield ended the week at 4.084%, down 9 on the day.
–Concerns over western finances continue to get press. BBG: French Gov’t on Verge of Collapse Over Budget. ZH: Merz Plunges Germany into a Debt Crisis. BBC: UK borrowing costs hit 27 year high. In the US there are more stories about increasing prices for electricity.
–On Tuesday, BLS releases a preliminary benchmark revision to establishment survey employment data (expecting another downward revision). Consumer Credit this afternoon. Auctions of 3s, 10s 30s begin tomorrow. PPI Wednesday and CPI Thursday.
–The week before last there was a buyer of 100k TYV 114c for 13 covered 112-16. Just thought I’d check performance on a static basis. On Friday, TYV 114c settled 23 vs 113-135. So, +10/64 on 100k on the call (+1), -59/64 * 18000, or -1.062. Call delta is now 34.
