Hedges unwound
March 17, 2026
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–Hedges placed for weekend risk on Friday were unwound yesterday, Red SOFR contracts were mostly +8, 5yr yield down 6.8 to 3.802% and 10’s fell 6.1 to 4.218%. Peak SOFR contract SFRZ7, +8 at 9671 or 3.29 vs current EFFR 3.64. Implied vol on rate futures imploded with many near SOFR straddles down 6 bps! As an example, the atm SFRM7 midcurve straddle (0QM6) went from 54.5 on Friday to 46.0 yesterday (9662.5^ vs 9664). Price action suggests little in the way of conviction with many spreads bouncing around on scant underlying news.
–LME halted metals trading due to a glitch. Soybeans were limit down after having had a nice run-up (partially due to concerns about fertilizer supplies). CLK6 (WTI) was down 4.38 yesterday at 92.46 but has re-gained about $3 of that this morning with renewed Iranian attacks on UAE. I’ve heard they’re offering Dubai office buildings at an even steeper discount than recent Chicago sales…
Morgan Stanley (according to BBG) says the default rate on private credit should hit 8%.
–20y US bond auction today. PPI and FOMC tomorrow.
