Genuine Risk
November 7, 2025
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–Good rally in rate futures which more than erased Wednesday’s losses. 10y yield fell 6.8 bps to 4.089% with TYZ5 112-265s. In SOFR, reds thru golds up 8 to 8.5. Peak contract SFRH7 is 9792, up 8 on the day. SOFR rate settling Wed was just 3.91%, only 4 bps above the Fed Effective rate of 3.87%. The great repo panic has ended. The reasons for the rally include a huge jump in Challenger layoffs: “Employers announced 153,074 cuts last month, compared to 55,597 cuts in October 2024. Last month’s figure was “the highest total for October in over 20 years, and the highest total for a single month in the fourth quarter since 2008.” Weakness in AI/tech stocks contributed to a fixed-income bid, with SPX -1.1% and Nasdaq Comp -1.9%.
–Williams is the latest to acknowledge the Fed will need to begin expanding its balance sheet for liquidity purposes. The inflation side of the Fed’s mandate gained some traction yesterday. Chicago Fed’s Goolsbee “…said a lack of inflation data during the government shutdown makes him more uneasy about continuing interest-rate cuts.” Cleveland’s Hammack said she’s more concerned about inflation than jobs. The dark horse is what some used to refer to as the Fed’s third mandate, financial stability. When that filly spins out of the turn and accelerates on the outside, the rest of the field is left in the dust. Sort of like the second filly to win the Kentucky Derby, Genuine Risk, in 1980. Bonus on link: Howard Cosell introducing the race.
–Trade of the day was a new buyer of 135k TYF6 113.5 calls covered, which settled 34 vs TYH6 112-24 (1’52 in the straddle). TYF6 113.5c added 131k in open interest. In futures, TU added 62k positions, FV 58k and TY 45k. The gain in TY OI is esssentially equal to the 32 delta used on the 113.5c.
Details:
+35k cov 112-145, paid 27
+50k cov 112-18, 32d, paid 30
+50k cov 112-205, 33d, paid 32.
This is likely the same guy who initiated the same strategy in late September, buying 113, 113.5 and 114 calls covered.
–I love seeing clips like one on BBG this morning: “Bernstein sees Prediction Markets Propelling Robinhood, Coinbase” HOOD was down 10.8% yesterday. Not sure “propelled” is the right word….
