It started (and ended?) in March
March 30, 2026
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–Friday featured a drop in short end yields and corresponding bounce in the curve. 2y ended -7.2 bps at 3.912% and 10y UP 2 bps to 4.436%. On the SOFR strip, Z6 was +8.5 at 9623.5, Z7 +5.5 at 9649.5 (peak contract), Z8 +1.5 at 9639.5, and Z9 -0.5 at 9625.0. This stretch of 3 years has SFR contracts trading between 3.5% and 3.75%, exactly the FF target band.
—This morning we’re seeing yields grind a bit lower as the US escalates into ground conflict in Iran. Oil is higher with CLK6 currently near $102/bbl, but stocks and bonds aren’t responding negatively. Almost feels like the month of March has encompassed the entire move: the onset of the US bombing campaign at the start of the month saw a brief blowoff top in bonds, followed by consistent selling thereafter. Stocks also trended lower through the month. But this morning, as we go into quarter-end, there are signs that selling activity is abating. Maybe we get the “all-clear” on April Fool’s Day (Wed), with the employment report being released on Friday.
–$/yen opened above 160 this morning and Japan’s finance ministry warned of intervention with ‘decisive action’. Not much effect so far (159.75), but there are a couple of related articles on BBG suggesting Japan might indirectly intervene in the fx market by selling Brent and WTI futures. Strikes me as ultimately unlikely and ineffectual, but then again, perhaps it’s not much different than Biden emptying out the SPR to contain prices. In any event, for the time being near oil contracts continue to lead the surge; intervention would surely cause calendar spreads to collapse in the near-term.
