Getting close to a treasury market put?
March 6, 2026
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–Both CLK6 and Brent (COK6) are at new highs, 81.35, +2.71 and 87.21, +1.80, but the spread has come down significantly from Wednesday’s high of 7.94. Hormuz closure causing intensifying pains. (as of early morning writing). Oil is still the lifeblood of the global economy.
–US treasuries continue to slide this morning with TYM6 112-04, from yesterday’s settle 112-10. Current price is just more than 2 points off Sunday night’s high. A combination of high energy prices and the prospect of US re-shoring in overdrive is likely stoking concerns about both inflation and budget deficits. (3, 10, 30 year auctions next week T/W/Th).
–Red SOFR contracts weakest once again, with peak contract SFRU7 -8.5 bps at 9678. Sunday night high 9711.5. 5y yield rose 7.7 bps to 3.736, 10s up 6.7 to 4.142. Year’s range in 10s so far is 4.294 in Jan to 3.94 in Feb so we’re around 61.8 retrace, though slightly thru this morning. Vol rebounded sharply from Wednesday’s dump.
–NFP this morning expected 55k from 130k last. U/E rate 4.3%. Retail Sales as well. Though rates could jump on stronger than expected jobs day, low rates are as important to the admin as are reasonable energy prices. I don’t think a ‘treasury market put’ is that far away. I would think the balance of risks regarding Iran this weekend may be about even; i.e. there’s a possibility of good news.
Rate futures pare early losses
March 4, 2026
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–On the day rate futures showed little net change. Weakness at front end with SFRZ6 -4.0 (9677.5), but every contract from SFRZ7 out to the next three years was unch’d to +1. 2y yield rose nearly 1 bp to 3.492, 10s and 30s nearly unch’d at 4.05% and 4.698. However, intraday action was more dynamic. For example, TYM6 low was 112-165 which was down 18; settle was 113-005. The early bearish driver was a new high in oil, with CLK6 spiking to 76.75, about $10/bbl higher than the previous week’s price.
–2/10 edged to a new recent low 55.8, a new low for 2026 as the Fed is considered to be on hold for the near future. In the last half of 2025 2/10 ranged from 42 to 62. In Jan and early Feb the range shifted higher, 60 to 72, but now we’re back in last year’s box.
–KOSPI Korean index has crashed over the past couple of days, following a precious metals-like rally from December. Start of Dec was around 3990. Close on 27-Feb was 6244, a gain of 57% in three months! Today’s price is 5093, a drop of about 20% but still well above 2025’s close. Nikkei is similar though more muted, down about 8.5% from the high after a blistering rally. Meteoric market moves tend to correct hard.
–I don’t think odds are high, but what if Iran falls and a US friendly gov’t is put in place much more rapidly than thought? Hard drop in oil prices and risk-on?
–ISM Services expected 53.5 from 53.8. Beige Book (FOMC is 18-March)
Hormuz blocked
March 3, 2026
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–Sunday night all interest rate futures posted new highs, but faded from there, with huge outside day ranges and settles near the lows. Typically this type of formation signals a reversal as buying pressure has been shut down. Late yesterday Iran said it was shutting down the Straits of Hormuz; oil is now at new highs (CLK6 76.12) and yields have continued to press higher as well. Whether it’s because of the inflationary aspect of higher energy prices, or the prospect that armament manufacturing is going into overdrive isn’t particularly clear, but Sunday night low yield in 10y was 3.92 and it’s now 4.10!
–ESH tested the year’s low overnight. On Feb 6, the low was 6751.50 and early this morning 6751.0 (though just now it’s printing lower). Breakout to downside of big sideways formation probably signals a test of the 200 DMA at 6668. Aside from the mideast war, several press articles highlight large redemptions from Blackstone’s flagship private credit fund. They all boast about daily liquidity…until they’re gated.
–TUM6 settled yesterday at 104-131 with cash yield 3.483% (up 10.8 bps on the day). Still there were some late protection upside buys: +30k TUJ6 106.625c for 0.5, then +50k TUK6 106.5c for 0.5. Range of market scenarios seems to be rapidly widening out. March VIX yesterday settled 20.93, and is 23.35 as of this morning note.
Iran attack fallout contained
March 2, 2026
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US/Israel attacks on Iran this weekend.
–On Sunday morning I had thought that red SOFR contracts might test old highs around 9725 on the Sunday pm opening. That was wrong, as SFRH7 and SFRM7 only made a high of 9711.5. As of this writing red SOFR contracts are marginally lower than Friday’s settles (SFRM7 settle 9706, now 9704) . On Friday, TYM6 settled 113-26. This morning’s high is 114-06, but last price is 113-23+. Oil prices are higher, with May Brent +5.40 at 78.27 and CLK1 +4.25 at 71.14. Though near contracts have exploded higher relative to deferred, a spread like CLK6/CLK7 which settled 4.50 on Friday (66.89/62.39) is around 8.10 this morning; on a generic basis it’s not through highs of the last couple of years. ESH6 put in a low of 6768.50, not quite through the low of 2026 which was 6751.50 on 6-Feb.
–In short, the market appears to feel as if fallout is contained. Near VIX contracts aren’t even above 22. Not much move in USD though I saw a clip saying that Trump ‘untied Putin’s hands’. Overall price action is contained.
–ISM Mfg today expected 51.5 from 52.6 last, but the munitions factories are going to be working overtime.
Any bears in here?
March 1, 2026 – Weekly comment
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Short note today as the weekend’s US/Israel attack on Iran dominates news and markets.
First, it’s clear that treasuries have regained safe haven status, with yields ending the week at recent lows. A bear market in equities may or may not be the outcome, but it’s prudent to exercise a modicum of caution.
2/20/2026 | 2/27/2026 | chg | |
| UST 2Y | 348.0 | 337.5 | -10.5 |
| UST 5Y | 365.2 | 351.0 | -14.2 |
| UST 10Y | 408.8 | 396.0 | -12.8 |
| UST 30Y | 472.4 | 463.3 | -9.1 |
The 2y ended 25 bps below the current FF midpoint target, currently 3.625% with 2y yield 3.375%, its lowest level since 2022. The 5y ended at 3.51%, the lowest since Sept 2024, just prior to the onset of the easing cycle. Low in Sept 2024 was 3.403%, which is likely an appropriate short-term target. Ten year at 3.96% is equal to the Oct 2025 low. The Sept 2024 low was 3.62%.
On the SOFR strip, the peak contracts are SFRM7 and U7 which settled 9706.0. +13.5 and +14.5 on the week. Largest change: U8, Z8 and H9, all +17 on the week, 9691, 9686 and 9681. It seems clear that some traders had more than an inkling of the weekend bombings, but there’s hesitancy to buy the short end too aggressively, given that actual FF cuts may be postponed.
Using the old Eurodollar futures convention, I consider the first red to be SFRH7. On BBG, that’s SFR6. Below is a table of the first three red prices, which surged on both Liberation Day in early April and in Sept/Oct when the Fed resumed easing:
| 1st red | 2nd red | 3rd red | |
| April 2025 hi (Lib day) | 9726.0 | 9728.0 | 9726.5 |
| Recent highs (Sep/Oct 25) | 9717.0 | 9717.5 | 9719.5 |
| High Settles (Sept/Oct ’25) | 9711.0 | 9713.5 | 9716.0 |
Currently SFRH7 is 9702.5, M7 is 9706.0 and U7 is 9706.0. My guess is that we might test Liberation highs at tonight’s open (Sunday, 01-March 2026).
Before this weekend’s activities, a key event was a research report by Citrini which looked out two to three years into the future to gauge possible ramifications related to the AI revolution.
https://www.citriniresearch.com/p/2028gic
“The sole intent of this piece is modeling a scenario that’s been relatively underexplored.”
It should have been clear all along that a single GPU cluster in North Dakota generating the output previously attributed to 10,000 white-collar workers in midtown Manhattan is more economic pandemic than economic panacea. The velocity of money flatlined. The human-centric consumer economy, 70% of GDP at the time, withered. We probably could have figured this out sooner if we just asked how much money machines spend on discretionary goods. (Hint: it’s zero.)
Some sought to discredit the report. I think criticism falls flat. The paper relates to Ben Hunt’s ‘common knowledge’ issue. Many in the market have suspected and even articulated a view that AI wil be extremely disruptive for white collar employment. Block cutting 40% of its workforce is a case in point. Jamie Dimon saying, “I see a couple of people doing some dumb things; they’re just doing dumb things to create AI or say they’re winning in the markets business” is another.
Citrini’s thought experiment was more specific, and forced a re-pricing, or, at the very least injected more uncertainty as to how individual companies might be impacted. This, at a time when private credit and private equity investments are already sucking wind, while USD stablecoins threaten the banking system.
Here are a few companies mentioned in the report, with net change from last Friday and net change from one month ago, 1/23/26.
AXP -10.7%, -14.6%
COF – 6.1%, -10.0%
MA – 1.7%, -1.4%
Z -1.8%, -34.4%
DASH unch, -14.8%
Second order effects and responses to this weekend will determine market outcomes.
The bearish case for equities is becoming stronger. However, it’s worth noting that the domestic freight industry is ticking up.
https://www.freightwaves.com/news/is-flatbed-signaling-a-manufacturing-renaissance
Freightwaves reports that Flatbed rejection rates just hit 42.5%. signaling tightness…either because of spot rates or capacity. Flatbed has more to do with basic manufacturing rather than consumer goods, and flows are reportedly internal rather than moving inward from ports. I.e. not import driven. Midwest manufacturing resurgence. Industrial production is firming, now at pre-pandemic levels.
Cass transportation is bit different, though the Cass Truckload Linehaul index rose 1.7% in January, with rates +3.2% y/y. Fairly modest gains, but at least a turn.
| 2/20/2026 | 2/27/2026 | chg | ||
| UST 2Y | 348.0 | 337.5 | -10.5 | |
| UST 5Y | 365.2 | 351.0 | -14.2 | |
| UST 10Y | 408.8 | 396.0 | -12.8 | |
| UST 30Y | 472.4 | 463.3 | -9.1 | |
| GERM 2Y | 205.2 | 199.5 | -5.7 | |
| GERM 10Y | 273.7 | 264.2 | -9.5 | |
| JPN 20Y | 292.2 | 292.3 | 0.1 | |
| CHINA 10Y | 178.3 | 180.8 | 2.5 | |
| SOFR H6/H7 | -56.8 | -66.8 | -10.0 | |
| SOFR H7/H8 | 7.0 | 2.5 | -4.5 | |
| SOFR H8/H9 | 20.0 | 19.0 | -1.0 | |
| EUR | 117.84 | 118.12 | 0.28 | |
| CRUDE (CLJ6) | 66.48 | 67.02 | 0.54 | |
| SPX | 6909.51 | 6878.88 | -30.63 | -0.4% |
| VIX | 19.09 | 19.86 | 0.77 | |
| MOVE | 64.27 | 73.38 | 9.11 | |
Yields breaking important support
February 27, 2026
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–Yields continue to press lower, due in part to scant signs of progress in Iran negotiations. (CLJ6 is 66.40 this morning, +1.20). Ten year ended (at futures settle) at 4,016, down 3.2 bps. This morning it is sub-4% (3.992). The attached chart shows the five-year yield, with support represented by the triple bottom in Sept, Oct and Nov (3.562, 3.548, 3.564). This morning it’s 3.548, targeting sub 3.50.
–There’s been a plenty of discussion about the Citrini report, musings on a world a couple of years into the future dominated by AI, but a here-and-now example is Block cutting 40% of its workforce. FT says the company is “leaning on AI tools.”
–Headlines yesterday about the 30y mortgage rate dropping below 6%. Monthly payment on $400k mortgage at 6.75% is $2595. At 6% it’s $2398, so around $200 less, thought that barely helps with increases in taxes and insurance. Just by comparison, at 4% that payment would be $1910.
–Miran said yesterday that the Fed should cut by about 100 bps this year. He was, of course, ignored, though SOFR contracts from SFRZ6 through SFRZ0 were +2.5 to +3.0. Late new seller of 25k FVJ6 110.5c at 10, settled 9.5 vs 109-2625. Reasonable sale against price resistance/yield support, esp if against existing long.
–PPI expected 2.6% yoy vs 3.0. Ex food and energy 3.0 from 3.3.
Market continues to peg terminal at 3.0-3.25%
February 26, 2026
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–Yields edged a bit higher yesterday with red, green, blue and gold SOFR contracts -3 to -4.5. Red to green SOFR pack spread settled at just 10.25 a new low (reds are 2027 contracts, price 9691.375, and greens are 2028 contracts, price 9681.125). Those two forward years are consistent with a terminal FF rate of 3.0-3.25%. Stocks had already rallied by the time NVDA earnings were released; reaction was muted with further gains quickly fizzling. ESH6 settled +56 at 6959.75.
–Ten year yield +2 bps at 4.048%, while 30s were up only 0.7 bp to 4.694.
–The early part of the session featured large exit block sales of SFRU6 and then SFRM6. -71k U6 at 9669.5 (9670.0s) and 24k M6 at 9648.0 (9648.5s) but late block of 20k M6/U6/Z6/H7 pack appeared buy. One large option trade of note, buy of 50k 0QZ6 9825c for 5.5 ( settled 5.75 vs 9690.5). Also a buyer of 100k June VIX 22 c for 3.35.
–News today includes Jobless Claims expected 216k. 7 yr auction.
–One other quick note: CME sent out a series of emails yesterday advising of technical difficulties with Metals and NatGas leading to disruptions in trading. Somewhat interesting that CME stock rallied to a new high early yesterday, capping a 22% gain just since the middle of January. The CME technical problems appeared to spark profit taking in CME stock, which ended up with a large outside day reversal, down 3.7% on the day.
Just loosen the standards
February 25, 2026
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–Doesn’t appear to be much reaction to State of the Union speech. Stocks have edged higher and bonds lower.
–Part of the bond move could be related to weakness in Japanese bonds as Takaichi nominated two new BOJ board members who are seen as dovish. Though JGB yields are well off highs set in January, the 30y gained about 8 bps to 3.286%. $/yen popped to a new recent high of 156.75. High in Jan was 159.45.
–Another interesting item is that Anthropic “has loosened its central safety policy…saying it will no longer delay AI development if it believes it lacks a significant lead over a competitor (BBG)” Probably an ominous development. Can we put some cheaper and lighter brakes on this car? It’ll go faster.
–Peak SOFR contract slipped back one slot to SFRU7, which settled 9697. Easing expectations remain somewhat muted, with nearer contracts being pulled down in price toward the current policy rate. This dynamic has caused near SOFR calendars to implode. SFRH6/H7 settled -59.5 (9634/9693.5), M6/M7 -46.5 (9650/9696.5) and U6/U7 -24.5 which is a new low (9672.5/9697). Red SOFR contracts continue to reject levels over 9700. One question is whether near calendars are cheap enough now to consider buying, and in some ways, it’s the same thing as asking if reds should be sold. Consider SFRM6/M7 at -46.5. Six months ago, on August 25, that same slot spread was -73.0 (relative prices 9620/9693). However, there were three 25 bp eases since then; the reds are still around the same place but the front contracts had to adjust to the new reality of lower FFs. I’m not sensing a particular edge in the calendars at this moment, I’d rather just own some cheap deferred calls or call spreads figuring that the next blow-up will send reds over 9725.
–5yr auction today. Tens were nearly unch’d with a yield of 4.029% and TYM6 settling 113-075, -3/32. Treasury rolls were very active yesterday. Currently 5y roll is 79.7% complete, 10y is 81% and Ultra bond is 79%.
–NVDA reports today.
And I’m Never Wrong About This Stuff
February 24, 2026
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–The main driver of markets yesterday was a report by Citrini Research, a thought experiment as if written a couple of years into the future, describing economic carnage wrought on workers by the onslaught of AI agents.
It should have been clear all along that a single GPU cluster in North Dakota generating the output previously attributed to 10,000 white-collar workers in midtown Manhattan is more economic pandemic than economic panacea.
https://www.citriniresearch.com/p/2028gic
The report may have seemed fanciful to some, but IBM was crushed by 13% (Anthropic can do the coding). American Express, another stock mentioned in the report slid by 7.2%. Hard to blithely dismiss losses of that magnitude.
–I can’t help but recall Larry David’s 2022 ad for FTX (a now defunct crypto company) in which he disparages every technological advance. To Thomas Edison with his lightbulb: “Does your wife know what you’re doing? You’re wasting your time. It’s sad.” And, on the political front: “Everyone gets a vote? Even the stupid people??”
“Ehhh, I don’t think so. And I’m never wrong about this stuff. Never.”
–Rates fell due to perceived deflationary impact of job losses. Tens fell 6.1 bps to 4.027%. Fives led, down 7.3bps, within spitting distance of the triple bottom low in yield at 3.562, 3.548 and 3.57. There will surely be downside follow-thru If 3.55 is breached. As mentioned in yesterday’s note, near SOFR calendars have been in utter freefall. For example, SFRM6/M7 sank another 6 bps yesterday to -48 (9651.5, +1.0 and 9699.5, +7.0). To start the month on 2-Feb, the spread was -20. There’s a lot of focus on SFRZ6/Z7 which settled -7 (9690.0 +4.0 and 9697.0 +8.5). This spread was +13.5 on 2-Feb. Easing prospects are being pushed farther out the curve which seems at odds with the Citrini piece, though we don’t know how long things might take to play out. The critical point in my mind is that the economic architecture is supported by equity prices. Does a shift to AI simply mean that the spoils accrue to capital, or will a surge in unemployment and corresponding collapse in consumption take down everything? If stocks cascade, the playbook is rapid rate cuts…and I’m never wrong about this stuff.
–Heavy trade in treasury calendars, with 10y easing from 2.0 to a low print of 1.25. (Spread was pressured all day as futures rallied, as June has more duration)
TU roll is 57% complete, all other contracts are 49 to 52% complete.
–State of the Union address tonight. NVDA reports tomorrow. Also of interest today, Consumer Confidence. Last at 84.5 which is the lowest since early 2014 (I guess everyone intuited the conclusions of Citrini well before the report). Expected to bounce to 87.1.
Flattened
February 23, 2026
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–Curve flattened Friday as the Supreme Court ruled that President Trump exceeded the powers to impose tariffs under the emergency provisions of IEEPA. A lower court will now decide on whether refunds will have to be made. Stocks rallied, though the idea that trade uncertainty has lifted is a stretch. Trump has now raised global tariffs to 15%. PCE prices were higher than expected, with headline 2.9% vs 2.8 and Core 3.0 vs a survey of 2.9.
–Aggressive new lows in several of the near SOFR one-year calendars. While SFRH6/H7 did not quite settle at a new low (-56.75s, 9634.25/9691), the next three one-year spreads did: SFRM6/M7 at -42.0, SFRU6/U7 at -18.5 and SFRZ6/Z7 at -2.5. To give a sense of the magnitude of the move, two weeks ago on 6-Feb, M6/M7 was -23, so down 19 in two weeks. U6/U7 was +0.5 and Z6/Z7 was +13. These spreads represent a harsh re-pricing of future Fed eases in both size and time. SFRH6 at 9634.25 is now a higher yield than current EFFR of 3.64% (No ease in March or April). SFRM6 at 9650.5 is 3.495%, around the midpoint of ease/no ease even though that time period should correspond to the start of Warsh’s term. At the December SEP the Fed had projected an end-of-2026 FF target of 3.4% (one cut in 2026). SFRZ6 settled 9686 or 3.14%, so the futures contract still projects 2 cuts by year-end, but in a broader perspective, the market seems pretty comfortable with the idea of a 3% terminal rate.
–One side note, last week there was massive buying of SOFR calls, mostly the 9800 strike. As mentioned previously, SFRU6 9700c have the most Open Int of any SOFR call at 513k. However, SFRZ6 9800c have vaulted higher in OI on heavy buying, from 174k on 13-Feb to 410k Friday. Settled 5.25 vs 9686.
–In treasuries, flattening was also on display. 2/10 closed at a new low just below 61 bps. Two weeks prior on 6-Feb, it was near the cycle high at 71.3.
–Factory Orders and Durables today. NVDA reports Wednesday. OWL being circled by buzzards.
–Treasury calendars should be quite active. Current roll percentages and settles (all settles are at low of cycle):
TU 29% -4 7/8s at low of move given TUM6 has 13% higher duration
FV 32% -1.25s also at low
TY 21.3% +2.0s (1×1 spread made a new low; duration adjusted 10y also made a new low Friday)
UXY 36.2% +4.0s
US 20.5% +14.0s
WN 21.6% +10.0s
