Market Cues
June 15, 2025 – Weekly Comment
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A few notes about Friday’s trades, as Israel / Iran conflict escalates.
Early in Friday’s session, large vol buyer, SFRH6 9637.5p covered 9641, 30 paid for 20k. So that’s equivalent of 63.5 in the straddle, which settled 64.5 vs SFRH6 9635.5. On Wednesday, H6 9637.5 straddle settled 62.5 vs 9637.0. Not too surprising to see implied vol bid on global uncertainty after being hit earlier in the week. (CLQ5 +12% this week)
A couple of additional trades which occurred on screen. 0QV5 9700c 15.0 paid 21k ref 9666.5. These calls (32d) are based on underlying SFRZ6 and expire on October 10, 2025. Settled 16.5 vs 9668.0. (Note that CME’s bulletin as of now does not show the volume listed, but DOES post an increase in open interest of 21k, so position is obviously new).
Another screen trade: 0QN5 9675c vs SFRU6 9662.0, 34d, 8.5 paid for 28k. These expire on July 11, 2025. Settled 9.5 vs 9664.0 in SFRU6.
The chart above is constant SFR8 or the eighth quarterly slot on the SOFR strip. It currently denotes SFRZ6 which is the peak contract on the SOFR strip at 9668. Next week, it will be SFR7 as June rolls forward. The highest settlement for this quarterly was 9723 or 2.77%, in September 2024 just prior to the initial 50 bp cut by the Fed. Currently, the Fed Effective rate is anchored at 4.33% or 9567. So a price over 9700 represents fairly aggressive easing prospects. As the chart indicates, that level has been rejected several times in the past year and a half.
Of course, it’s not necessary to get above 9700 for these calls to make money. It’s only about a rally associated with increased vol. (You don’t have to be faster than the bear, just faster than your friend).
However, while yields were down on the week (5s down 10.7 bps to 4.019% and 10s down 9 bps to 4.42%) Friday’s price action demonstrates that ‘flight-to-safety’ is not into treasuries, but rather into gold. On Friday 10s rose 6.5 bps while gold jumped $50 (GCQ5 3452.80) to tickle all-time highs.
One other interesting trade Friday: SFRM6 9800c bought vs 0QM6 9800c, paying 1.0 for M6 covered 9659 and 9670. Settles: 8.75 vs M6 9653.5 and 8.5 vs M7 9663. (Both options expire June 12, 2026). This trade is a synthetic steepener. Works best on aggressive easing which typically causes reds to outperform and steepen vs more deferred SOFR contracts. Obviously, the 2% strike is ambitious and zero premium outlay would be preferable, but I wouldn’t be surprised to see more of this type of trade go through.
Interesting comments by Ryan Bohl from RANE on Thoughtful Money podcast; Bohl is a Mideast expert. He said the fall of Assad in Syria effectively removed a barrier for Israel to bomb Iran, and that Iranian assets/intelligence in Syria disappeared with Assad. From that standpoint, the timing worked to Israel’s advantage. He added that this is strictly an air campaign.
Clearly the geopolitical backdrop is now the dominant feature. Uncertainty is increasing. VIX rose just over 4 to 20.8 while MOVE also firmed from a relatively low 89.65 last week to 95.31 on Friday.
One last thought on ‘No Kings’. Yet another Illinois leading politician was sentenced to prison last week: Mike Madigan, a Democrat who ran Illinois as Speaker of the House for 50 years (bribery/corruption). This public servant’s net worth is listed at $40 million and I’d bet my bottom dollar that’s low. If the weekend’s parades are an indictment against a sudden outbreak of political corruption, it’s old hat in Illinois. Former Governor Blagojevich left prison recently after Trump’s pardon. Current Governor Pritzker tried to buy (from Blago) the Senate seat vacancy left by Obama.
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FOMC on Wednesday. The market prices almost no chance of an ease this week. However, the press conference could give a stronger hint for a cut at the July 30 FOMC. Currently, FFQ5 is 9573.0 vs EFFR of 4.33 or 9567, so around 25% odds of an ease on 7/30. Of course, post-meeting, after Trump hurls a few more insults and calls for immediate rate cuts, those odds may go down.
| 6/6/2025 | 6/13/2025 | chg | ||
| UST 2Y | 403.9 | 395.6 | -8.3 | |
| UST 5Y | 412.6 | 401.9 | -10.7 | |
| UST 10Y | 451.0 | 442.0 | -9.0 | |
| UST 30Y | 496.4 | 491.1 | -5.3 | |
| GERM 2Y | 187.8 | 185.1 | -2.7 | |
| GERM 10Y | 257.3 | 253.3 | -4.0 | |
| JPN 20Y | 233.0 | 235.2 | 2.2 | |
| CHINA 10Y | 168.9 | 169.8 | 0.9 | |
| SOFR U5/U6 | -67.0 | -73.5 | -6.50 | |
| SOFR U6/U7 | 6.5 | 6.5 | 0.0 | |
| SOFR U7/U8 | 19.0 | 19.0 | 0.0 | |
| EUR | 113.96 | 115.52 | 1.56 | |
| CRUDE (CLQ5) | 63.63 | 71.29 | 7.66 | |
| SPX | 6000.36 | 5976.97 | -23.39 | -0.4% |
| VIX | 16.77 | 20.82 | 4.05 | |
| MOVE | 89.65 | 95.31 | 5.66 | |
