“Flight to crap”
July 23, 2025
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–Yields continued to drift lower yesterday with 10s ending exactly the same as EFFR at 4.33%, down 3.6 bps yesterday. This morning, with the Japan tariff deal announcement and Japanese bond yields running to new highs, treasury futures have pulled back. As of this note, TYU5 is 111-04, -9, and lower than Monday’s settle of 111-06. Japanese stocks have exploded with Nikkei up 4%.
–New lows in all near 1-yr calendar spreads in SOFR. Eases are being priced into the future. SFRU5/U6 new low -97.5 (9583.5, +0.5 and 9681.0, +3.0). SFRZ5/Z6 -77 (9611.5, +1.0 and 9688.5, +3.0). Let’s consider a wild hypothetical and say the Fed cuts 50 next week. (You asked for it DJT…) SFRZ5/Z6 would likely rally 40. There was a trade yesterday, around 10k: SOLD SFRV5 9637.5c (6.75s) and BOT 0QV5 9700c (15.0s). Paid 8, settled 8.25, appears to be exit. Obviously the perceived risk is that the calendar keeps rolling down to a more inverted level (Z5 barely moves, while Z6 runs to or thru strike). So the prudent thing to do is exit, but an immediate big cut would have saved this position!
–Meme mania day with IB’s Steve Sosnick saying there’s a “flight to crap”. Kohl’s KSS was yesterday’s posterchild but there was a lot of it. I’m not even sure if the data’s right, but according to my chart, KSS had a range of $9, 12.37 to 21.39. In one day it’s a larger range than this entire calendar year thru Monday. Day in the sun for the stocks with the most short interest. The last time this happened was when the gov’t was handing out direct payments to households. Maybe now it’s because crypto is providing liquidity to the bros. Destined to end in FULL TEARS.
–Silver made a new high since 2011 with SIU5 39.555s, +22.1. Copper new high settle in futures.
–Today, Existing Home sales expected 4.0 million rate.
–Earnings reports from GOOGL and TSLA post-close, and pre-open CME slated to report.
–TARIFFS, TRADE DEALS, MEME STOCK MANIA…It’s BUSINESS TIME
not a flight to crap…Flight of the Conchords!
