CPI Wednesday. Eases to be pushed further back?
June 9, 2025
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–Higher than expected NFP (+139k) sent yields soaring, with reds leading on SOFR strip, down 15 on the day. Peak SFRZ6 contract is now (Fri) at a price of 9656.5, down from a high print on Thursday of 9683.5, just over a quarter percent from Thusday’s high to Friday’s low. 9640-9650 should be solid support. In treasuries, 5s were up 13.8 bps to 4.126%, while tens rose 11.7 to 4.508%. Twos also up 11.7 bps, to 4.039%, but 5/30 spread declined 5.6 bps to 83.6, having been as high as 98 to end the month of May.
–One year calendars in SOFR had been as inverted as -100, but are now more like -75. At the start of May, SFRM5/M6 was -103, now -75.75 (9567.75/9643.5). FFN5/FFN6 is -78.5 (9567.5/9646). Obviously, easing estimates are being squeezed out. Citi apparently pushed back the timing for an ease from the July FOMC to Sept. There’s almost nothing priced in for a cut at next week’s FOMC: SFRM5 is 9567.5 or 4.325% as is FFN5, while Fed Effective is 4.33% and SOFRRATE has ranged from 4.26 to 4.35 in the past couple of weeks. FFN5/FFQ5 spread settled at a new high of -3.5 (9567.5/9571). The July FOMC is right at month’s end, on the 30th, so this spread is an easy proxy for expected ease at the meeting, 10-15% chance.
–SFRM5/U5 settled -23.5 (9567.75/9585.5) so right around one ease. SFRU5 9587.5^ settled 26.5, also around one-quarter percent.
–3, 10 and 30 year auctions start tomorrow. 30y currently seems comfortable hanging out around 5%. NFIB Small Business Optimism tomorrow, with CPI on Wednesday. China/US talks continue. LA/US talks seem to have broken down.
