Space, the final frontier
June 12, 2026
***********
–Thing took off, well, like a rocket in front of the SpaceX IPO as Trump said the deal with Iran is done. Ten year note dropped 8.1 bps to 4.459% while the 2y fell 6.4 to 4.062%. New low in ten year breakeven (treasury minus tip yield) at 232 bps, back where it was in 2021 before actual hiking occurred. (four year range has been just above 200 to just above 250). WTI (CLN6) is just above 84 at this writing, -3.50 on the day. ESM6 +1.6% on the day at yesterday’s settle.
–June midcurve expiration in SOFR today. SOFR contracts from reds through golds were +7 to +8. Lowest near contract still SFRM7 which settled 9600.5. One early interesting trade was an outright new buyer of 60k SFRH7 9650c from 13.25 to 13.5; settled 14.5 vs 9602.5. I believe Citi stated earlier in the week that they see three rate CUTS coming, which would put the FF target 2.75 to 3.0%, so maybe a 3.5 strike makes sense.
–Mag7 stocks have been under pressure for the past week or so, probably to make room for SpaceX. Perhaps another indication that liquidity has to come from somewhere given voracious capital raises.
–Amazing to me that they marked Household Net Worth up by $113b, even with the Q1 decline of $1.82T of corporate equities. Real Estate and ‘Other’ came to the rescue with quarterly changes of +913b and +1.14t. (Really?)
–UofMich Sentiment and Inflation expectations today. Sentiment expected 46 from the historic low print last month of 44.8. One-year inflation expectation is 4.9% vs 4.8 last. Obviously the market is discounting current inflation readings given oil’s slide and possible disinflationary effects from AI.
