Don’t Move
April 4, 2026 – Weekly note
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Last week I suggested that US Military/Industrial Policy requires low long-term funding rates, and a gov’t/industry pact (maybe overt, maybe covert) to ensure funding for long-term critical projects.
The ultimate irony would be Warsh coming in as Fed Chair and EXPANDING the Fed’s Balance Sheet, partially in response to the energy shock depressing demand, and partially to cap long rates. Small odds, but then again, Fed Chairs typically are tested at the start of their terms. Greenspan with the 1987 crash, Bernanke with subprime, Yellen (not really) Powell, with everything under the sun. (in Q4 2018 SPX fell 20%).
Warsh was on the Board during the GFC from early 2006 to 2011. He said in retrospect that the Fed at that time was justified in QE and unconventional policies due to emergency. His criticism is that the measures were left in place too long. So…IF the Fed again has to act decisively in an emergency, I don’t think Warsh will hesitate.
Even though employment was released Friday (NFP higher than expected +178k but previous revised down by 41k, with rate 4.3%), the data in chart above is from Thursday, April 2. Market moves in futures on Friday were relatively muted on the data. WNM6 (ultra-bond) ended -11/32 at 116-10, up about 1.9 bps, equiv to around 4.90 in US 30y.
Since surging to a high with the onset of US/Israel campaign against Iran, MOVE index (white line on chart) has retraced significantly. The MOVE index measures vol across the treasury curve (only 20% is weighted in 30y yield), but it’s somewhat interesting that the 30y yield has also pulled back from new highs. In my opinion, this chart is NOT sending a signal of inflationary concerns related to surging energy costs.
Consider as well the chart above. In purple is the 10y Breakeven (10y – TIP). At a current 237 bps it’s around the middle of the year’s range. Doesn’t appear especially worrisome with respect to long-term inflation expectations at the moment. I can’t recall who to attribute this next idea to, but I had read that 10/30 is probably the best measure of term premium. The white line is 10/30 and that spread is now just 56, having rejected 70 in August and December. Again, the measure is not showing stress relating to a surge in long yields or in term premium. (in 2010 and 2011, 10/30 spread exceeded 140. Recent highs are mid-80 in 2016 and 2021).
Of course, it all can change on a dime. But for now, the US bond market just isn’t showing panic. Not in vols and not in spreads. I would also mention that weakness in precious metals off the highs might well be a correlated move that suggests we’ve passed ‘peak panic’.
Of course, MOVE can surge on an unexpected yield decline. The relative stability in the long end of the treasury market is probably a source of support for equities, and I would opine that’s especially so for companies involved in critical domestic manufacturing projects. Now, it’s a question of supply chains and final domestic demand holding up.
Below is a spread chart of contracts I happen to watch, FFQ6 and FFJ7. I use August 2026 as the first, because it’s a clean month. Warsh will probably chair June 17 and July 29 meetings. Then there are 5 FOMCs between these two contracts of Aug’26 and April’27 (9/16, 10/28, 12/26, 1/27, 3/17).
In January, the spread was around -20, ~ one 25bp ease. At the start of Iran, it hit -43, so closer to 2 eases. FFJ7 actually traded below 3%. Now, the spread is near 0, with FFQ7 9636.5 or 3.635% and FFJ7 9638.0 or 3.62%. Both contracts have gravitated to the current Fed Effective rate of 3.64%. Message: In the month of March, they’ve taken EASING expectations out of this forward spd, but are not quite shifting toward hikes (associated with potential inflation pressures).
News this week is capped by inflation data:
Thursday
PCE Prices expected 2.8% yoy from 2.8% with Core 3.0% from 3.1%
Friday
CPI m/m 1.0 from 0.3 with yoy 3.4% from 2.4%. Core CPI m/m 0.3 from 0.2 with yoy 2.7 from 2.5.
| 3/27/2026 | 4/2/2026 | chg | ||
| UST 2Y | 391.2 | 379.4 | -11.8 | |
| UST 5Y | 406.8 | 394.5 | -12.3 | |
| UST 10Y | 443.6 | 430.7 | -12.9 | |
| UST 30Y | 498.0 | 488.4 | -9.6 | |
| GERM 2Y | 267.0 | 261.2 | -5.8 | |
| GERM 10Y | 309.2 | 299.1 | -10.1 | |
| JPN 20Y | 325.5 | 326.3 | 0.8 | |
| CHINA 10Y | 181.4 | 181.4 | 0.0 | |
| SOFR M6/M7 | -3.0 | -10.5 | -7.5 | |
| SOFR M7/M8 | -14.5 | -9.0 | 5.5 | |
| SOFR M8/M9 | 13.5 | 12.5 | -1.0 | |
| EUR | 115.09 | 115.39 | 0.30 | |
| CRUDE (CLK6) | 99.64 | 111.54 | 11.90 | |
| SPX | 6368.85 | 6582.69 | 213.84 | 3.4% |
| VIX | 31.05 | 23.87 | -7.18 | |
| MOVE | 111.95 | 84.41 | -27.54 | |
