Base case is 25 bp cuts. There could be more
October 3, 2025
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–Quiet session Thursday. Little change across SOFR strip with contracts out to 4 years unch’d to -0.5. Tens fell 1.7 bps to 4.087%. Premium continues to compress. As an example, TYZ5 settled +2.5/32 at 112-295. TYZ5 113c settled 49 which was DOWN 1/64 on the day (1’39 in the straddle, from 1’46 on Wednesday, 50 dte).
–There continues to be accumulation of SFRZ5 9650/9662.5cs for 1.25 to 1.5, >100k have traded in last couple of weeks in a faint echo of the SFRU5 9612.5/9625cs that was bought in size in the last cycle, only to expire worthless. Yesterday about 50k Z5 9625/9618.75/9612.5 put fly bought for 0.75. Settled 0.5 ref 9635.0. The 9650c is peak open interest at 805k; that strike requires perception of more than two additional 25 bp cuts, settled 3.25 vs 9635. The 9625p has 303k open, settled 4.25
–FFX5 settled -0.5 at 9615, near certainty of a 25 bp cut in October. FFX5/FFF6 calendar settled -24 (9615/9639) with that spread capturing the Dec FOMC. Bias remains: 25 bp cuts in the near term, with a chance of something bigger on an outlier (like an imminent US invasion of Venezuela…)
–CLZ5 made a new low, settled 60.16, lowest since the beginning of June. Once again, slight new recent low in 10y breakeven at 234.2 bps (treasury-tip).
From MNI:
“Let’s be clear: the jobs data scheduled to come out this Friday has undoubtedly been collected and the President must release it,” Warren, the top Democrat on the committee, said in a statement to CNN. “Without it, the Federal Reserve will not have the full picture it needs to make decisions this month about interest rates that will impact every family across the country.”
[US Gov’t facing mass firings. I think the Fed has a pretty full picture]
Doesn’t matter what language. In the US substitute ‘IPO market’ with ‘private credit’
“Good description of the IPO market turning into a wealth transfer mechanism from retail to encashing Promoters.”
In related news, BBG reports that UBS funds are heavily exposed to First Brands bankruptcy: “More than $500m is said to have been invested through various UBS funds.”
