I Got One More Silver Dollar
December 21, 2025
*********************
And I got one more silver dollar
But I’m not gonna let ‘em catch me, no
Not gonna let ‘em catch the midnight rider
–Allman Brothers Band
Silver closed at an all-time high 67.15. From Liberation Day low in April of 28.35, the gain is 138%! Gold/silver ratio ended at 64.6, lowest since Covid in 2020 (64.05).2007. Though this has been a general area of support, I would note that the low in 2011 was 31.71. In that episode, silver ran from a low of 14.66 in Feb 2010 to 49.80 in April 2011, a gain of 240%. An equivalent gain of 240% off LibDay low would be 96.39. I don’t know where a barrel of WTI will be trading when we get there in H1, but currently an ounce of silver buys nearly 1.2 barrels using CLG6, up from 1 barrel as recently as two weeks ago.
An article on BBG (15-Dec) notes that Fannie/Freddie have added about $55b of retained mortgages to their portfolios since May…combined holdings $234b currently. From BBG, “…fueling speculation that they’re trying to push down lending rates and boost their profitability ahead of a potential public offering.”
Since mid-2022 Fed has been decreasing holdings of MBS, whittling about $16b per month, down $195b from Dec 2024 to Dec 2025. Fannie and Freddie aren’t quite plugging the gap from the Fed, but close. The Fed doesn’t hedge. Someone seems to be hedging now.
The buyer of ~30 delta covered calls in treasuries was back in this week, specifically buying TYH6 113.5c which settled 0’27, +0.32d vs 112-160. Open interest in the strike now 171k. Jan 113.5c still have 263k open. I noted two 50k clips this past week but I think there were three:
Dec 15, +50k TYH6 113.5c 31, 0.31d vs 112-115 (equiv 2’07 straddle price)
Dec 19, +50k TYH6 113.5c 30, 0.30d vs 112-185 (1’55)
In any case this trade will continue but has not boosted implied vol. As friend JC said, regarding FNMA and FMCC holdings, trades make sense from a convexity hedge standpoint; vol at relatively low levels. I would think the magnitude of the trade in March expiry will well exceed totals in Jan calls of approx 400k (which expire this Friday). [see vol chart in lower section]
In a thin upcoming holiday week, if an outlier event caused a rally through the 113.5 strike, trade might get unwieldy. TYF6 113.5c settled 1.
While mortgage risk appears to be effortlessly transferred to market makers, Blue Owl this week backed out of shouldering $10 billion of financing related to an Oracle/OpenAI data center. A signal that the market in general might start demanding more risk premium in terms of financing voracious capital expenditures related to AI? It starts small…
Bank of Japan hiked to 0.75% and the 10y JGB ended the week at a new high of 2.016%, equaling the level from August 1999. In 2006 it had just tested 2.00%. In any case, yen weakness ensued, with $/yen 157.75. In April 1990, $/yen peaked at 159.90. Since then, the high was 161.69, made in July 2024. The intervening low was 2011, 75.82. Though there are official protestations against the yen weakening too much, it looks like the market wants to test the 2024 high. In the past twelve months, the price of gold in yen has appreciated from 395k yen to 684k, a gain of 73%.
Silver and gold closing the year on highs. SPX and Nasdaq Comp are near highs for the year. Last week crude touched $55/bbl, at the low of this year, back to early 2021. One might conclude that it was a good year for bitcoin, but it’s actually lower on the year: last December it was around 92k and currently 88k, weighed down by levered derivatives. Strategy (MSTR) is down 64% from its high in July, and just off the low print of the year. (Another indication that risk capital is getting stingier at the margin).
2/10 treasury spread at new high for the year, 67 bps. However, MOVE index (treasury vol) is at the beat low. From a high of 140 in April, it’s now 59.4, the lowest since late 2021, before the tightening cycle ever started. The low in early 2021 was 42.5. Because I had recommended buying bond vol last week (oops), I am attaching a chart of US vol. It rarely gets lower than this. At a time when long-end yields in several jurisdictions are closing out the year at new highs (Japan, Germany, France, Sweden) it’s a bit surprising that treasury vol is at the bottom of the Chicago River in cement shoes. VIX is also at the low of the year at 14.91 (14.22 low in August).
As mentioned above, January treasury options expire on Friday. The CME is closing rates early on Wednesday but it’s a full session Friday. A lot of people will be out. Crazy outlier day? As a two-way lotto ticket, I like BUY USF6 114p for 3 (settled there vs 115-10) BUY TYF6 113.5c 1. Pay 4 for the strangle.
NOT A RECOMMENDATION. JUST SOMETHING TO WATCH.
A FEW OTHER THOUGHTS
Hammack this weekend echoed Williams, who said on Friday he has “…no sense of urgency to act further.” Waller said last week the Fed is 50-100 over neutral, but with the questionable CPI data of 2.7 yoy and current FF target 3.5-3.75, the argument for another 100 in cuts seems a bit dubious. Unless really bad stuff happens…
In San Francisco 130k residents were without power last night. Waymos couldn’t drive. No stop lights. (mercy!). They attribute this black-out to a fire at a power plant.
The CME lost connectivity after Thanksgiving. They identified a cooling issue at the data center.
Anyone else starting to feel like the explanations are a bit flimsy, no matter what the topic? There was a nuclear radiation accident. Homer spilled his coffee on the master console…
Well, ther’ ain’t no sense in it. A body might stump his toe, and take poison, and fall down the well, and break his neck, and bust his brains out, and somebody come along and ask what killed him, and some numskull up and say, ’Why, he stumped his TOE.’ Would ther’ be any sense in that? NO. And ther’ ain’t no sense in THIS, nuther. -Mark Twain, Huckleberry Finn
I think I’ll just keep an open mind as to cause/effect, no matter how they report it on the news. But here’s something really worrying. “Jim Beam, which is one of the largest makers of American whiskey in the world, is planning to shut down production in Happy Hollow in Clermont on Jan. 1 through 2026.” Time to start prepping.
https://www.kentucky.com/news/business/article313847580.html
| 12/12/2025 | 12/19/2025 | chg | ||
| UST 2Y | 352.6 | 348.3 | -4.3 | wi 347.5 |
| UST 5Y | 374.7 | 369.2 | -5.5 | wi 369.8 |
| UST 10Y | 419.2 | 414.9 | -4.3 | |
| UST 30Y | 485.7 | 482.6 | -3.1 | |
| GERM 2Y | 215.2 | 215.3 | 0.1 | |
| GERM 10Y | 285.6 | 289.4 | 3.8 | |
| JPN 20Y | 290.6 | 296.8 | 6.2 | |
| CHINA 10Y | 183.7 | 182.6 | -1.1 | |
| SOFR H6/H7 | -37.0 | -41.0 | -4.0 | |
| SOFR H7/H8 | 17.5 | 20.0 | 2.5 | |
| SOFR H8/H9 | 20.0 | 21.0 | 1.0 | |
| EUR | 117.42 | 117.10 | -0.32 | |
| CRUDE (CLG6) | 57.24 | 56.52 | -0.72 | |
| SPX | 6827.41 | 6834.50 | 7.09 | 0.1% |
| VIX | 15.74 | 14.91 | -0.83 | |
| MOVE | 69.25 | 59.41 | -9.84 | |
