Happy 4th of July!
July 3, 2025
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–NFP today expected 110k from 139k last, with a rate of 4.3%. Given yesterday’s -33k ADP, risks appear weighted towards sub-100. I had expected to see quite a bit of high gamma put buys in front of today’s data as yields remain fairly low, but an example of a late trade was a buy of TY wk1 Monday 112.25 CALL covered 111-19, 6 paid for 10k. (TYU5 settlement of 111-20). Since it expires Monday, it captures both today’s data and weekend risks (terror threats).
–Early part of the session was dominated by UK politics, with Starmer leaving Chancellor of the Exchequer Reeves to twist in the wind. Unsurprisingly, UK finances are beset by faltering confidence. On Tuesday 10y Gilt yield was 4.453% and it shot up to 4.61; 30y went from 5.228% to 5.42%, nearly 20 bps. This morning yields have eased with 10y 4.545%.
–In US rates, the curve steepened. SFRU5 was strongest, at +1 to 9599. U6 -1.5 to 9685, U7 and U8 both -3 to 9675.5 and 9655.0. Ten-yr yield +4 bps to 4.289%, being drawn closer once again to the current EFFR of 4.33% which has acted as a magnet.
–Other snippets from yesterday:
-MSFT cutting 9k jobs, a bit less than 4% of workforce (228k)
-Del Monte (canned fruits/vegetables) filing for bankrupty. In and of itself not important, but perhaps a sign of things to come for companies that were loaded up with debt when rates were low, and now can’t handle re-financing.
-FHFA’s Pulte calls for Congress to investigate Powell. And stomps his feet for added emphasis.
–Nice pop in Corn and Wheat last couple of sessions (off lows).
–Rate futures SETTLE 12:00 CST (1:00 NY time). Screen stays open until 4pm CST (regular time), but stocks and cash treasury close early.
