If Iran settles, then oil and inflation expectations wither
May 6, 2026
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–Yields edged a bit lower Tuesday as stock indexes continued to make new all time highs. 2y down 2.6 bps to 3.936%. Tens -2.8 bps to 4.414%. SOFR contracts +1 to +3.
–This theme has been covered on X, but in case you missed it: yesterday the SOX index closed 51% above the 200 day moving average. From its low on March 30 it’s up 53%. At the same time Home Depot (HD) is down 20% from the high in February. Berkshire is down 8.4% from the Feb high. MCD is down 17%. All notched new lows for the year yesterday. Since 3/31 DJIA is up 6% and SOX +45%.
–This morning CLM6 prints under 95/bbl, down over $7 and a clear rejection of last week’s surge to 110. DXY is testing last month’s low, currently prints 97.83 with $/yen 156 as fears of intervention remain. June Gold is +145 to 4715, right in the middle of April’s range. TYM is up half a point to 110-26, having printed a new recent low Monday of 110-005. I have been highlighting SFRM7 as it’s one year forward and close to the lowest SFR contract on the strip. Settled at a new low of 9615.5 Monday, almost ½ pct higher in yield than EFFR and SOFRRATE, but this morning it’s 9628.5.
–In short the market sees an end to Iran’s Hormuz closure, which should alleviate inflation pressure and therefore pressure on rates, weakening USD and allowing rate futures to bounce.
–ADP this morning expected 120k from 62k, while NFP tomorrow expected 65k from 178k. Quarterly Refunding Announcement.
