Muted market reaction
January 6, 2026
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–Markets were calm following the weekend extraction of Maduro. Like a bad tooth. With an immediate implant all ready. US interest rate futures drifted higher in quiet trade. On the SOFR strip reds through golds (years 2, 3, 4, 5) were up 2.5 to 3.5, with peak contract remaining SFRZ6 at 9690.5 (3.095%). Ten-yr yield fell 2.4 bps to 4.163%. Implied vol in rates remains pinned near recent lows. TYH 112.5^ settled 1’25 (4.4) vs 112-135. New seller of a strangle strip: TYH 111/111.5/112 p strip with TYH 112.5/113/113.5c strip, 2k sold at 2’30. The buyer of 50k lot clips of 113 and 113.5 calls has been quiet over the holidays, but yesterday a new buyer of 50k TYH6 114c for 14 covered 112-145, 17d. The earlier buys, both in this and previous cycles, were 30-33 delta calls, so may or may not be related. Japan 10y yield made a new high for the move and is 2.13% this morning, up 100 bps in the past year.
–Feb Crude ended up a buck at 58.32, Precious metals and bitcoin jumped, perhaps supported by the idea of demand for assets outside of gov’t jurisdictions. Rumors are swirling about Iran’s leadership, but the prospect of destabilization is hardly translating into market pricing. ESH6 ended +43.25 at 6943.25. Feb Fed Funds settled unch’d at 9640.5 vs current EFFR of 3.64 or 9636.0. Next FOMC is 28-Jan and Feb is a ‘clean’ month, so as of now odds of another cut are a bit under 20%. Lowest one-yr SOFR calendar is H6/H7 at -41.5 (9648.5/9690) and in FF’s, J6/J7 is -45.0 (9651/9696). While the bias still favors easing, pricing is muted.
