Oil lower. Rate futures respond with higher prices and crushed vol
May 27, 2026
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That’s NOT a Ferrari. Former Ferrari chairman Montezemolo: “We risk the destruction of a legend. So sorry. Take the Prancing Horse off.” Now that THAT’S out of the way…
–Yields fell hard on Monday and futures maintained gains yesterday as oil fell. From Friday to Tuesday settle, SFRH7 and M7 led the pack, settling +10.5 at 9605.5 and 9604.5, the latter contract being the low on the strip out to blues. A bit higher yet this morning, SFRM7 9607. SFRZ6/Z7 calendar settled exactly zero, with both contracts 9613.5. One of those prices is wrong! On the rally implied vol was hammered with many SOFR straddles settling as much as 4 bps lower. SFRM7 9600^ settle 81.25 Friday and 79 yesterday. 0QU6 9600^ settled 50.5 Friday (9598.5) and 0QU6 9612.5^ settled 46.5 (9608). 0QU7 9600^ 48.5s.
–CLN6 printing 90 as of this note, -3.89 and near yesterday’s low.
–Same story in treasuries with TYU6 109.5^ 2’11s (109-185) vs Friday 109^ 2’21s (108-315). Buyer of 30k TY wk5 (this Fri) 109.5/109.25ps, 6 paid 30k. 10y treasury yield -7.7 bps to 4.493%
–Notable large SOFR opt trade: +75k SFRZ6 96.3125/96.375/96.4375 c fly pd .75. Tight window for end of year, looking for nothing out of the Fed. Also exit sales of 0QM6 9600 puts.
–BOJ’s Ueda “indicated the need for vigilance over the impact of oil price spikes on the underlying inflation trend” (BBG). BOJ meeting June 16 with hike expected. $/yen won’t stay down: now 159.38 chewing up near April 30 intervention high (160.72)
–From TOL @t11mmo yesterday on X: ERM6 vol continues to get crushed The 97.625/97.75 Strangle is now 2.5/3…12000 were sold at 4.5-4 this am Expiry is Monday June 15 (14 fixes) ECB is Thursday June 11 – 23bps priced The vol move lower today is basically saying the ECB raising rates in June is a “done deal”
–Astonishing run in MU and other chips. MU closed at 322 on March 30. Two months later it has nearly tripled, 940 new high in pre-trade this a.m. Up nearly 3x with market cap over $1T. If there’s trepidation about upcoming SPCX, OpenAI and Anthropic IPOs, it’s not evident here. MU and INTC alone have added about $1T mkt cap since end of March (SPCX expected valuation 1.75 to 2T). Bitcoin not confirming…after trading 82k early in May it’s now just below 76k.
