Downplaying payrolls
February 10, 2026
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–Light volume Monday. Yields eased 1 to 2 bps, with tens -1 at 4.196%. Early bid attributed to Hassett: “I think that you should expect slightly smaller job numbers that are consistent with high GDP growth right now,” Hassett said Monday on CNBC. “One shouldn’t panic if you see a sequence of numbers that are lower than you’re used to, because, again, population growth is going down and productivity growth is skyrocketing.” Payrolls expected around 70k tomorrow (Wednesday).
–Today’s news includes ECI expected +0.8% and Retail Sales expected +0.4%. Three year auction, with tens after employment data tomorrow.
–One trade from yesterday (adding) was a 20k risk reversal, buying SFRU6 9725c covered, vs selling 0QZ6 9600p covered. The call settled 7.75 and the put 5.75. Mismatch on both time and underlying contracts. I only mention this trade because it caused me to check open interest (up in both), but I noticed that across ALL SOFR calls, SFRU6 9700c has the most open interest at 406.5k (settled 12.0, 35d). So, the overall appetite for long SOFR calls has moderated significantly, despite all the noise associated with 1/16% wide call condors.
–As mentioned yesterday, Feb SOFR midcurves expire Friday. 0QG6 9687.5 straddle settled 10 ref SFRH7 9687.5. 3QG6 9650 straddle settled 9 ref SFRH9 9647. Consider these levels vs TYH6 112.25^ which settled 40 and has one more week of time value (20-Feb expiry). Napkin calculation, 40/64’s is $625, and DV01 on the contract is around $65.5. According to these calculations the TY straddle is a bit less than 10 bps. (FV is slightly over 10). Obviously not apples to apples, but it seems to me the market is pricing whatever expectation of action there might be in the current week, with almost nothing left for next week. (TY wk2 112.25^ settled 32, so the spread to TYH is 8/64’s)
