New Fed Chair sits on his hands?
January 8, 2026
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–Near contracts suggest that a January ease is becoming less likely. SFRH6 settled -1 at 9645.5 and FFG6 (February is a clean month which prices the Jan 28 FOMC) also settled -1.0 at 9640. Current Fed Effective is 3.64 or 9636.0, so FFG suggests only ~15% chance of ease. While SFRH6 was -1.0, SFRH7 was +1 at 9689 and H8 +2.5 at 9670.5. Treasury curve flattened as well, retreating from last week’s recent highs. 2y -0.4 bp to 3.465% and 10y -4.1 to 4.134%. TYH6 112-185s with H6 112.5^ 1’23.
–After the Jan FOMC, the next meeting is 18-March. SFRH6 options expire 13-March. SFRH6/SFRM6 calendar spread, which brackets the end of Powell’s chairmanship, settled -21.5 (9645.5/9667.0). The prospect for large, immediate rate cuts associated with a new Trumpian Fed Chair would suggest a calendar spread price well below -25; that idea has fizzled.
–Pre-holidays the 50k lot clip covered call buyer in TYH had bought 100k 113.5c and 50k 113k. After the break, likely the same buyer +50k TYH 114c for 14 vs 112-145, 17d on Monday and +50k TYH 114c 15 cov 112-18, 20d yesterday. OI in 114c up 38k yest to 124k. Switching to lower deltas; likely more to buy. Also a buyer of 30k TYG6 111p yesterday for 2.
–While it’s sometimes hard to establish cause/effect price changes in rate futures given econ data, there was no such ambiguity with Trump saying he wants to curb corporate buying of single-family homes. Blackrock (BX) -5.6% and Blackstone (BLK) -3.3%. Yesterday JOLTS lower than expected and near recent low at 7146k but Service ISM was stronger at 54.4.
–NFP is the big release for Friday. Today: Job Claims expected 212k from 199, Challenger Job cuts, Unit Labor Costs and Productivity, Consumer Credit.
