Yields ease, rate vol sinks
June 16, 2026
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–Quiet trade in rate futures as yields continued to ease. Tens fell 2 bps to 4.465%. SOFR contracts from June’27 thru golds (5th year forward) were +3 to +3.5. SFRM7 is still the lowest near contract at 9603 or 3.97%, while the peak on the strip is U28 and Z28, both 9616.5 or 3.835%. 30-y yield 4.95 this morning, 50% target from Feb low 4.61 to May high 5.18 is 4.90.
–SpaceX continues to rise overnight, now with a market cap of over $2.5 trillion. The Wall St Journal has this helpful headline: ‘Stocks have even more room to fly if Hormuz reopens’. Unabashed cheerleading is something I thought was rare for WSJ, but the fever is everywhere. For Warsh, it’s back to a conundrum: Goods inflation may not be the problem, it’s ASSET price inflation. With record stocks comes record margin debt: $1.3t as of end of April. SBLOCs also growing (Securities-based line of credit) which I estimate at $500b.
–Implied vol in rates was marked significantly lower yesterday. For example, SFRM7 9600^ from 88.0 settle Friday to 83.25 yesterday. SFRU7 9625^ from 17 to 15 yesterday ref 9624.5. Current FF mid is 3.625% or 9637.5. A hike would be 3.875% or 9612.5. So I suppose the straddle covers both outcomes, unch’d to just one hike, with breakevens 9610/9640. But I’d guess something happens within the next 87 days to shake that assumption.
–BOJ hiked to 1% but $/yen remains pinned to the high, 160.34. At the same time RMB is also at a new high 6.757, with China Retail Sales ‘slumping to levels unseen since the pandemic, down 0.6% last month from a year ago.’ (BBG)
–CLQ6 this morning 77.85, down 1.59, near lowest level since mid-March.
–Housing Starts today expected 1430k from 1465. FOMC tomorrow.
