New highs for stocks (not inflationary)
October 27, 2025
*******************
–Bessent names 5 who are still in running for Fed Chair: Waller, Bowman, Warsh, Hassett, Rieder. I would bet Warsh or Reider.
–Friday featured slightly higher rates and stocks at record highs. SOFR contracts -1.0 to -1.5 from SFRU6 to SFRU29. Ten year yield up 1.2 to 4.001% with TYZ5 113-140. The Fed is fully expected to cut 25 on Wednesday with another 25 likely in Dec. End of QT also on the table at this meeting. However, forward expectations of easing have become more muted. Peak SOFR contracts now SFRZ6 and SFRH7 at 9702.5, both were 9711 on 16-Oct.
–Inflation data not as bad as expected but CPI yoy still 3%. Which is exactly where peak SOFR contracts are. Moving towards a future of zero to negative real rates?
–Trump/Xi meeting expected to bring a positive framework, though the idea that rare earth supplies for US military applications start flowing freely is something I doubt, regardless of what any agreement says.
–From Nick Timiraos Friday:
The White House says the October CPI likely won’t be produced due to the government shutdown. If that holds, then Friday’s CPI for September will be the last one that Fed officials see until the morning of the second day of the December FOMC meeting.
As if it matters. When inflation was manifest through exploding financial assets no one cared. The Fed has access to many private forecasts, and the man in the street knows inflation is well above 2%.
–One notable trade Friday: buy of 25k US Monday Week1 Nov (3-Nov) 110.5p for 1. USZ5 settled 118-19. There have been a lot of 1 tick premium downside bond puts bought recently…
