Big week, low vol
July 28, 2025
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–Going into a big week vol remains near the lows with MOVE at just 82.09 and VIX 14.93. Big news over the weekend of course, was a tariff deal made between the US and EU, with the EU paying 15%. Another uncertainty eliminated (for now). Equity futures ramped to new highs. EUR has pulled back from recent highs (current 1.1664 vs last week high 1.1771). China/US negotiations were extended another 90 days.
–As can be seen by attached chart, MOVE is at the lows since the Fed’s hiking cycle began in 2022. However, lower levels occurred post-covid in 2021. Almost feels like Yield Curve Control could be in the works… This week features Quarterly Refunding Announcement with an estimate of total borrowing needs today, and, more importantly, the composition of borrowing announced Wednesday. 2s and 5s auctioned today with 7s on Tuesday. GDP and FOMC Wednesday. Payrolls on Friday.
–Friday featured slightly lower yields, with tens -2.2 at 4.384 (again, almost seems pegged to current EFFR of 4.33%). New low in red to green SOFR pack spread at just 11 bps. Reds (U6, Z6, H7, M7) settled 9674.25 and Greens (U7 thru M8) settled 9663.25. The curve steepens a bit from there, but reds and greens are both consistent with terminal Fed Funds around 3-3.25%.
–Friday featured a couple of large treasury option buys: +50k TYU5 113c for 8 covered 110-26. Settled 8 vs 110-315s. Buyer of 50k US wk-1 (this Friday, NFP) 107p for 1. Over 40 bps otm relative to futures settle of 113-19.
