Curve grinds steeper, 5y swap in futures
February 5, 2026
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–Once again, despite some wild moves in other markets, rate futures ended little changed. SOFR strip +0.5 to +2.0. Peak contract SFRZ6 +1.5 to 9679. In treasuries the bias was steeper. 2y -1.3 bps to 3.557%, 10y +0.5 bp to 4.276, and 30y +1.1 to 4.914%. TYH6 settles: Monday and Tuesday 111-190, Wednesday 111-19+. With 2 weeks to go, TYH 111.5^ is 43/64s.
–Just a couple of notable items in rates: First, a slight new high on the move in 2/10 to 72 bps…only up 1.8 bps, but hasn’t been this high since January 2021, before the hike cycle began. Intervening low in March 2023 was -109.
Second, there was a screen seller of about 20k 5y swap spreads, Adding to 5k (new) sold on Tuesday. This spread trades in decimal form as net change from the previous day. The CME symbol is EWV, which is YIWH26 (5y ERIS SOFR swap) vs FVH6. Most trade done at +0.005 to +0.01. In dollar terms, +0.005 to +0.015 is $10 per contract. DV01 on FVH6 is $42.80. DV01 on YIWH6 is $45.30. So if bid/offer is 0.005/0.015, that’s $10 or slightly more than 2/10’s of a bp. Solid liquidity developing. Late yesterday 5y swap was -27.7. YIWH26 settle 99.705 and FVH6 108-2425.
–Just under a year ago, Kevin Muir (MacroTourist) highlighted this, having to do with trading index vol vs that in individual stocks (maybe a tad early?):
THE DISPERSION TRADE: THE NEXT CRISIS IN THE MAKING?
Feb 20, 2024
On BBG this morning, there’s this headline: ‘Trillion-dollar Tech Wipeout Ensnares All Stocks in AI’s Path’
Certainly there’s been a drubbing in software stocks. Palantir (PLTR) was down 11.6% yesterday and is down around 20% in the past six months. However, I noticed a couple of stocks with much different profiles. For example, yesterday Dow Chemical (DOW) +6.2%, HAL +1.4%, ConAgra (CAG) +3.6%. Might say there are disparate results. Old, boring coming back to the forefront. [I have personal positions in all stocks mentioned]
