I’ll just camp out in the 2 year for a while…
February 6, 2026
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–Rates cratered yesterday with the 2y down 7.5 bps to 3.481% and 10s -6.8 to 4.208%. 2/10 treasury spread squeaked out a new high for the move at 72.7. The rally was sparked by weakness in labor indicators: large jump in Challenger Job Cuts, Jobless Claims up to 231k and, perhaps the biggest catalyst, much lower than expected JOLTS at 6542k vs 7146 last. It’s the lowest JOLTS since 2020, having been cut in half from the 2022 high of 12134. Know what else has been cut in half? Bitcoin. But it occurred in a much shorter timeframe, just 4 months from the high over 126k to a low of 60k this morning. I had mentioned a few days ago that bitcoin’s market cap was $1.5T and today it’s more like $1.3T now. A lot of capital evaporation, but it’s really the web of related products/etf’s that represents a risk. Consider that this week (after yesterday’s earnings report) the market cap of AMZN vaporized by $200 billion or so. (Coincidentally the same amount AMZN is -or maybe WAS – going to invest this year in AI capex).
–Of course equity market weakness was also a large factor in yesterday’s FI rally, with SPX down 1.2%.
–The SOFR strip jumped 8 to 9.5 bps from June’26 to June’29. Peak contract is still SFRZ6 at 9687.5 (+8.5). I had recently said that gold and silver were the new ‘flight-to-quality’ associated with risk-off moves. However, yesterday we went back to the old playbook and just reached for the 2y for safety (and other treasuries as well). Implied vol sparked higher in SOFR, with most straddles up 2 bps or more. As an example, on Wednesday SFRU6 settled 9672 and the 9675^ was 34.0. Yesterday the contract ripped to 9680.5 and the 9675^ settled 37.5.
–Just earlier this morning, a block of 53k traded in SFRH6/M6 spread at a price of -22.0 (9639.5/9661.5). Early yesterday this spread was -16.5, and it settled -20.5 (9641.0/9661.5). I am guessing block was a sale. In any case, the market is tilting toward ease, but SFRH6 is weighed down by the idea of Powell slow-playing, even if stocks are under severe pressure. (So I guess you thought you had the upper hand with a criminal indictment?) Yesterday, SFRG6 9643.75c settled 1.75 ref 9641, (expire one week from today), but probably could have been bought for 1.5. About a week ago, someone sold a decent chunk of FFJ6/FFK6 spread at -4.0. There’s an FOMC on April 29, so that spread isolates odds for that meeting. Yesterday the spread settled -5.5 (9642.5/9648). If stocks do happen to go off the rails, then fears of a near term cut will instantly reset to higher odds. But it’s not happening yet.
–One other aside. There’s a guy on X, Nobody Special (@JG_Nuke) who had an interesting take on the Super Bowl and specifically Anthropic’s ads which are going to run, which brutally mock OpenAI for now accepting advertising. Altman had previously said OpenAI would only accept ads as a last resort. Here we are. Nobody Special says these Anthropic ads, being played on the biggest stage in the US, may mark a psychological shift in the entire AI outlook. Probably a huge stretch…but impossible? This one’s pretty funny:
