Fat Finger Economy
August 7, 2025
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–Just a quick indication of depth in the most liquid markets in the world. At 11:40am, USU5 printed 115-00. Just 33 seconds later, the day’s low at 114-11 occurred. At 11:41, 115-00 printed again. They’re blaming it on a ‘fat finger’. Maybe that’s what the whole payroll report was: just a fat finger. Certainly, equity index investors are shaking it off. In a way, if I were in the administration and tasked with the job of making data and markets look good going forward, I’d make a note of thin midday conditions just hit the BUY button. (We can stick the losers into the ‘sovereign wealth fund’).
–On Friday, someone paid 1.0 for 50k 0QZ 9787.5/9800cs and 0.5 for 50k or more 9837.5/9850cs Yesterday, he bought 50k 0QZ 9800/9837.5/9850c fly 1x1x1 for 3 (and sold the 9837.5/9850cs at 0.25).
SO…he’s left with LONG 9787.5c by my calculations….net price a bit over 4. Settled 4.25 vs 9696.5. Long an outright call makes more sense if looking for (or hadging against) something bad
–Russia deadline supposedly August 8…but late reports yesterday indicate a Trump/Putin meeting is in the works.
–Bank of England expected to cut. Yesterday SFIM5 settled 9587.25 and SFIU5 at 9611.5, so there’s your 25 bps.
–Thirty year auction today. CPI is August 12. Going into Jackson Hole on August 21-23. It’s ironically titled, “LABOR MARKETS IN TRANSITION”. Because WHEN YOU CAN’T GET THE DATA RIGHT it’s hard to make POLICY. It’s a bit late for this note, but yesterday I was pulled down the rabbit hole of reading old Greenspan Jackson Hole speeches. Super interesting. From 1999: (more in subsequent notes)
Doubtless, valuations are shaped in part, perhaps in large part, by the economic process itself. But history suggests that they also reflect waves of optimism and pessimism that can be touched off by seemingly small exogenous events.
Pinned forward rates?
August 6, 2025
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–Ten year yield little changed yesterday at 4.194% in front of today’s auction. 30s tomorrow. However, the front end was pressured as “the Treasury said it plans to auction $100 billion in U.S. debt that expires in four weeks, after selling a record amount of six-week bills on Tuesday.” Weakest SOFR contracts on the strip were SFRZ5, 9525 (-4.0), H6 9648.0 (-4.5) and M6 9671.5 (-4.0). Indication of curve flattening: Z5 9625, -4.0, Z6 9695.0, -3.0, Z7 9684.5 -1.0 and Z8 9663.5 -0.5. New seller of November one-month SOFR vs FF. Spread settled -4.0 bps, down -0.5 on the day, SERX5 9602.5, and FFX5 9606.5. Open interest up 18k in both. Indications of money-market tightness.
–New buyer yesterday of >40k SFRZ5 9625/9637.5/9650/9662.5c condor which settled 2.75 ref 9625.0. Works best with 3.5-3.75% FF target by the Dec FOMC, the date of which is 10-Dec (SOFR options expire 12-Dec). Also a large package buyer of 0QH6 structure: +60k 9725c 20.0s, -100k 9750c 13.0s, +20k 9762.5c 10.5s and +20k 9775c 8.5s. SFRH7 is peak contract on the strip, 9697.0s
0QH 9725/9750cs settled 7.0
9725/9750/9762.5 c fly settled 4.5
9725/9750/9775 c fly settled 2.5
Reds have pretty much been capped between 9700 and 9720.
–We’re seeing targeted option structures, though I think a new Fed, along with a number of other slippery variables, could create a lot of back and forth in SOFR prices.
A Fed cut solves EVERYTHING
August 5, 2025
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–Powerful rebound in stocks following Friday’s drubbing, with SPX +1.5% and Nasdaq Comp up almost 2%. Yields continued to ease, with tens down 2 bps to 4.198%. Open interest rose in TY a whopping 106k to 5.1m. SOFR contracts up 1.5 to 3 across the strip. New low in SFRU5/SFRZ5 to -34 (9695, +1.5/9629, +3.0) as Trump’s reshaping of the Fed is expected to spark easing on an updated timeline. FFV5 (Oct Fed Funds) settled +2.5 at 9591.5 or 24.5 bps above the current EFFR of 4.33% or 9567. FFV is pricing certainty of one cut of 25 at the Sept FOMC. One more piece of bad data will see that contract trade above 9600.
–Adding buyer of 50k TYU5 113c overed 112-025, 24d, paid 18. Settled 23 ref 112-12. Downside: +40k TY wk1 WED, (expires tomorrow) 112/111.75ps pay 3. Three-yr auction today, tens and thirties Wednesday and Thurs. Buyer 15k FVU5 109/108.25/107.5p fly cov 109-075, 14d, pay 12.5
–Palantir blew past expectations post-close. At the bell 160.66, now near 170. Huge revenue growth to $1 billion on the quarter, Market cap of $380b. So if revenue comes in at, let’s say, $6b a year, then price-to-sales is over 60. Seems reasonable….right? I guess a FF rate of 4.25% is really holding the ‘new economy’ back.
–Sr Loan Officer Survey by the Fed generally reflects tighter lending standards and weaker demand. Supports easing? ISM Services today expected 51.5 from 50.8.
https://www.federalreserve.gov/data/sloos/sloos-202507.htm
Big start for a quiet August
August 4, 2025
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–Big beautiful bounce in equity futures this morning as economic information and policy interpretations become more fluid.
–Massive decline in front-end rates Friday due to NFP at only 73k with huge revisions lower over the previous two months. Friday settle of FFV5 at 9589 (4.11%) is 22 bps higher than Fed Effective of 4.33 (9567). So not quite certainty of an ease at the September FOMC, but close. SFRZ5 rose 29 on Friday to 9626, while SFRH6 was the leader, +31.5 to 9649.5. SFRU5/Z5 made a new low of -32.5 (9593.5/9626). One-year calendars, which have been in prolonged downtrends all year, popped higher as nearer contracts rallied more due to the prospect of near terms cuts. For example, SFRH6/H7 settled -48, up 11 bps on the day, from -59 (new low) on Friday.
–Large buys Friday include 50k each 0QZ5 9787.5/9800cs for 1.0 and 0QZ5 9837.5/9850cs for 0.5. SFRZ6 settled 9696.
–Fed Governor Kugler resigned. I looked up Governor salaries: $250k/yr. Perhaps not worth the stress of what might become a contentious job!
–PLTR reports today. Plenty of earnings reports this week. I haven’t even carefully finished this article yet but am posting link anyway…
It contains a graphic with this info:
Infrastructure Capex as % of GDP, by Era
Railroads (1880s) 6.0%
Telecom (2020) 1.0 to 1.2%
AI Data Centers (2025) 1.2% (and just getting started)
possible bust to follow?
https://www.noahpinion.blog/p/will-data-centers-crash-the-economy?
| Will data centers crash the economy?This time let’s think about a financial crisis before it happens.www.noahpinion.blog |
Americana
https://www.the-sun.com/motors/14893924/sturgis-motorcycle-rally-rally-august-south-dakota-festival/
Labor Quake
August 3, 2025 – Weekly Comment
****************
FOMC 30-July: no ease, Powell says labor market is solid
Next day, Trump calls Powell TOTAL LOSER
Friday: NFP just 73k, with a massive revision of the previous month from 147k to 14k
Trump fires head of the BLS
Fed Governor Kugler resigns/ FOMC dissension to grow/who would want Fed Chair job?
Trump sends nuclear subs off Russia coast.
According to WSJ, NY Fed President Williams indicated he is open to considering a rate cut before the Sept FOMC
Post on Linked In from friend Christopher Long:
More on Payrolls:
Besides the massive revisions to May and June, here’s another interesting stat: from January though June, the total of the first print on payrolls was 985,000. Fully revised that number is now 524,000, 47% less than initially reported.
So here’s a question for all: if the Fed had had the previous 2 months payrolls as they stand now, showing only 19,000 and 14,000 increases, would they have cut this week? I think the odds priced in the market would have been over 50%, pushing them to cut.
Headline leading Sunday’s WSJ: Unemployed Americans Endure Longer Job Searches in a Cooling Market.
From my note last week:
My belief is that labor indicators might deteriorate quickly (NFP on Aug 1 and then Sept 5). Jackson Hole is August 21-23.
…I think by Jackson Hole the market will be pricing a 50/50 chance between a cut of 25 and 50 at the Sept meeting (worth around 35 bps), with some odds of another 25 in October (worth 7-10). I think final Sept expiry could be 9607 to 9612. [Friday 8/1, SFRU5 9593.5s]
Technical patterns in equity futures are not good. On Sunday 7/27, an EU trade deal was announced. New contract highs in ESU5 and NQU5 on Sunday night, but ESU5 failed, and closed lower than Friday (NQ didn’t). Then META and MSFT earnings sparked new contract highs (again) late Wednesday into Thursday. But Thursday ended in key reversals: new contract highs, outside ranges, lower closes both ES and NQ. Not always a valid sell signal, but certainly a red flag. Friday’s sell off associated with the employment report created an outside WEEK. Recent examples in ES of new contract highs, outside week, and lower close: week ending 7/19/24. 7/19 close 5553.75. By 8/5 the close was 6% lower at 5217.50. Just before that: week ending 4/5/24, the close was 5253.0. Settle on 4/19 was 4.7% lower at 5003.75.
The Fed doesn’t cut when things are good. They cut when things are bad. As mentioned previously, in Sept 2007 when the Fed kicked off an easing cycle with an initial 50 bp whack, stocks initially embraced it and ran to new all-time highs in October. Then it all came tumbling down.
What’s the tell? Maybe it’s going to be credit spreads. HYG and JNK both gapped opened lower on Friday but held July’s lows. Below is a chart showing VIX in green and Hi-Yld 5y CDS spread in white. Perhaps not particularly informative, but both have turned up. A 50% retrace of April’s spike doesn’t seem to be an unreasonable target (around 390 bps in the spread from current 336).
Friday featured a huge rally in front-end SOFR contracts. Leading the charge was SFRH6, +31.5 bps to 9649.5 (right around 3.5% vs current Fed Eff 4.33%). The market delivered the ease that the Fed didn’t. SFRU5 settled +17 at 9593.5 which is 26.5 lower in yield than EFFR. FFV5 settled 9589 (+11.5), near certainty of an ease at the September FOMC. Worth noting is that the 30y bond yield only fell 8.2 bps on the week to 4.806%. Trump’s assumption that mortgage rates will come down with official cuts in the FF target is woefully naïve.
Near SOFR calendar spreads exploded higher as the market instantly pushed forward the easing schedule…for now. Surprisingly the peak SOFR slot is still the 7th quarterly, SFRH7 at 9697.5. Another day like Friday and the peak contract will move forward on the strip.
Given that the official end of Powell’s term is May, there has been focus on SFRH6/U6 calendar, with the idea that large cuts might occur directly with a new Fed Chair. Now, timing has been thrown into question. SFRH6/U6 settled -39 (9649.6/9688.5). This was +4.5 on the day. Like other SOFR calendars it’s been in a solid downtrend. On January 14 the spread was +6 (hi of year). Low for the year was Thursday at -43.5. While near spreads will remain inverted, there will necessarily be some shifts as the market reassesses timing and magnitude of eases. However, deferred spreads from reds back will likely steepen. As an example, SFRZ6/Z7 settled +13.0 on Friday (9696/9683) which was +8 on the day. Thursday was low settle for the year at +5.0.
Economic data is light this week. ISM Services on Tuesday.
Fed speakers usually appear right after the FOMC and this week that could be of interest. Cook and Collins participate in panel event Wednesday, and Daly speaks that afternoon. Bostic on Thursday. Musalem on Friday.
Auctions:
Tuesday $58b 3yr
Wednesday $42b 10y
Thursday $25b 30y
altogether raising $35.2 billion in new cash. Note the TGA is only $370 billion, and to get that back to a reasonable level of $800 billion represents a general liquidity drain.
OTHER THOUGHTS/ TRADES
There have recently been a decent amount of 50k or larger option trades, I will just highlight a few.
Last Friday there was a buyer of 50k TYU5 113.0c for 8 covered 110-26. On Friday these calls settled 19, +13 on the day vs 112-06+. New buyer of 23k TYU5 112.5c for 15 on Tuesday settled 29 on Friday, +20 on the day. Treasury vol was bid at the end of the week, though not severely. On the week MOVE just 83.83 from previous Friday 82.09.
Early last week a buyer of 60k SFRV5 9618.75/9643.75cs for 4.5. On Thursday this spread was around 3, but settled 9.25 on Friday (17.75/8.5 vs SFRZ5 9626.0). Buyer of 75k SFRQ5 9700c for 0.25 got no satisfaction from Friday’s settle at the same price (0.25), but I would bet the shorts are a little less comfortable.
Friday buyer of 50k each 0QZ5 9787.5/9800cs for 1.0 and 0QZ 9837.5/9850cs for 0.5. If looking for big dislocations, it’s better to just be long an outright call rather than a tight call spread, but interesting in any case.
| 7/25/2025 | 8/1/2025 | chg | ||
| UST 2Y | 390.5 | 369.8 | -20.7 | |
| UST 5Y | 396.6 | 376.9 | -19.7 | |
| UST 10Y | 438.4 | 421.8 | -16.6 | wi 423.0 |
| UST 30Y | 492.7 | 480.6 | -12.1 | wi 480.2 |
| GERM 2Y | 194.5 | 192.5 | -2.0 | |
| GERM 10Y | 271.6 | 267.7 | -3.9 | |
| JPN 20Y | 255.8 | 255.4 | -0.4 | |
| CHINA 10Y | 173.2 | 170.2 | -3.0 | |
| SOFR U5/U6 | -83.5 | -85.0 | -1.5 | |
| SOFR U6/U7 | -4.0 | -11.0 | -7.0 | |
| SOFR U7/U8 | 21.5 | 19.5 | -2.0 | |
| EUR | 117.43 | 115.89 | -1.54 | |
| CRUDE (CLU5) | 65.16 | 67.33 | 2.17 | |
| SPX | 6388.64 | 6238.01 | -150.63 | -2.4% |
| VIX | 14.93 | 20.38 | 5.45 | |
| MOVE | 82.09 | 83.83 | 1.74 | |
Megathrust
August 1, 2025
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–Front end of the SOFR curve continued to get hit as Trump’s cagey negotiating tactic of hurling personal insults at Powell appears to be backfiring. “You stay classy San Diego.” SFRZ5 settled -5 at 9597.0 and H6 -6 at 9618.0. Last Friday SFRH6 settled 9630, so about half an ease lower. SFRH6 price is now only 50 above the current EFFR of 4.33% (9567). Easing is being stretched further out in time; new low yesterday in SFRH6/SFRH7 calendar yesterday at -59 (9618/9677). Z5/Z6 settled near its low at -75.5. Ten-year yield actually declined on the day by 1.6 bps to 4.36%.
–New buyer yesterday of 75k SFRQ5 9700c for 0.25. Expires 2 weeks from today on SFRU5 underlying which is nearly 1 1/4% out of the money. U5 settled 9576.5. Odd buy, but then again unsettling seismic activity on Russia’s far eastern coast of Kamchatka is ongoing due to the megathrust earthquake. (Obviously Q5 9700c need an ‘outlier’ to play, and there’s more than one candidate lurking in the shadows).
–Stocks lower this morning following AAPL and AMZN (the latter of which was described as “gloomy” by CNBC). News sources are attributing profit taking to tariffs and deadlines. Undoubtedly some blame will be laid at the feet of the Fed for not providing adequate liqudity. However, the Sunday evening surge associated with the EU trade deal was met with sellers, and then Wednesday’s MSFT, META blowout to new highs was also met with selling yesterday. Outside key reversal days in ESU5 and NQU5 yesterday, new record highs, outside range, close lower and near the lows. Price action is whispering caution. (don’t forget the Elvis Costello song – Whisper to a Scream). In fact, with this early morning range in ESU5, it’s an outside WEEK.
–Payrolls today expected 110k from 147k with the rate at 4.2% from 4.1%. Press reports and social media suggest a continuing shift towards ‘jobs are hard to get’.
Steady Fed Policy
July 31, 2025
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–General disappointment as Powell played down the prospect of an ease in September. Weakest contracts on the SOFR strip were near quarterlies, SFRZ5 fell 8 to 9602 and H6, M6 fell 8.5 to 9624 and 9647. 2/10 treasury spread made a new recent low of 44 bps. Ten year yield rose 4.8 bps to 4.376%. Yesterday’s data was solid with Q2 GDP 3.0% and ADP 104k. Oct FF settled -5 at 9575.5, indicating about a 1/3 chance of a 25 bp cut in Sept.
–During the press conference Powell acknowledged 2 sets of employment and inflation data will be released in front of the Sept meeting which would provide more information. From the FOMC statement, “Uncertainty about the economic outlook remains elevated.”
–One aspect of that uncertainty was on display yesterday in the copper market. HGU5 plunged around 20%, as Trump pared back some tariffs. (RTRS) “US would impose 50% tariff on copper pipes and wiring, but fell short of sweeping restrictions expected and left out copper materials such as ores, concentrates and cathodes.” The COMEX premium over London vanished.
–Jon Hilsenrath, the former Fed whisperer, notes that the TBAC report (Treasury Borrowing Advisory Comm) included the following line, which was not included in previous reports: “The Committee felt strongly that independence of the FOMC remains of paramount importance to a healthy and well-functioning Treasury market with widespread investor demand.” Another official rebuke to Trump’s imperious pronouncements and threats. Treasury auctions next week on Aug 5, 6, 7 are $58b in 3s, $42b 10s and $25b 30s, which will raise new cash of $35.2b.
–Today’s news includes Q2 ECI, PCE Prices, expected 2.5% from 2.3% yoy with Core expected 2.7%. Jobless Claims and Chgo PMI as well. NFP tomorrow expected 110k.
–META and MSFT sparked an instant rally of 75 handles in ESU post-settle. AAPL and AMZN today.
Rattling
July 30, 2025
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–Perhaps the most important news from yesterday was Trump again giving Putin a 10 day ultimatum for a peace deal in Ukraine. Yields sank yesterday with tens down 9 bps to 4.328% (right at the current Fed Effective level). Peak SOFR contract is the 7th quarterly, SFRH7, which settled +7 at 9683.0, nearly 100 higher than SFRU5 at 9584.5. SOFR curve somewhat flatter: SFRU5 +1.0 to 9584.5, U6 +6.0 to 9671.5, U7 +7.5 to 9677.0, U8 +8.0 to 9656.0. Red pack to deferred contracts made new lows on spreads. 2/10 treasury spread at 45.7 is at recent low. Oil soared. At the 3:00pm rate futures settle, CLU5 was 69.45, +2.74, +4%. Russia earthquake swarm, nuclear related? (more below)
–It’s FOMC day, but there’s a lot of additional news as well. Quarterly Refunding Composition, Q2 GDP expected 2.6% with Core PCE Price 2.3%. MSFT and META after close.
–In March the Fed annouced that QT would go down to $5b for treasuries per month starting April, with MBS remaining at $35b. Possible changes today? Waller, who is likely to dissent in favor of an immediate ease, believes the Fed shouldn’t hold ANY MBS, but it’s still possible MBS roll-off will be adjusted down in a nod to Trump (to influence lower mortgage rates). Monday’s Treasury borrowing estimate of $1.01T likely to be followed by an announcement today of heavier t-bill issuance rather than long coupons, which fits price action yesterday. Treasury Gen’l Acct (TGA) is currently only $333B; I’m sure the admin will want to top that up closer to $1T well before midterm elections in order to buy support target spending on the nation’s priorities.
–There were a few chunky treasury option trades. First, I’ll note that TY open interest rose 95k, up nearly 2%, a sizable jump in front of big data. This is from prelim data, but OI across treasuries was up: TU +41k, FV +14k, UXY +5k, US +13k and WN +21k. Suggests new buying rather than short covers.
A few option trades:
+50,000 wk5 TY Thursday 110.75 puts, 3 – expire 7/31 – day after FOMC.
+8k USU5 110 puts cov 114-21, 11
+20,000 FVU5 108 puts, 14 (new)
+20,000 TYU5 108.5 puts, 3 (exit)
+23,000 TYU5 112.5 calls, 15 (settle 16 ref 111-115, new)
–I have never seen a swarm of earthquakes like this on the USGS page. The Daily Express suggests a “botched” nuclear weapon test. I don’t like the sound of that…
https://earthquake.usgs.gov/earthquakes/map/?extent=2.28455,-249.78516&extent=70.84467,-32.51953
From an AI blog:
| DeepSeek rattled global markets in January by demonstrating that China could build competitive AI on a budget. Now, Beijing startup Z.ai is making DeepSeek look expensive. |
| … |
| Z.ai CEO Zhang Peng announced the pricing Monday at Shanghai’s World AI Conference, positioning GLM-4.5 as both cheaper and more efficient than its domestic rival. The model runs on just eight Nvidia H20 chips (half what DeepSeek requires) and operates under an “agentic” framework that breaks complex tasks into manageable steps. |
Some playing for big ease, but long end remains suspect
July 29, 2025
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–Yields rose slightly with curve steepening bias as supply weighed. Twos and fives auctioned yesterday, 7s today. Ten-yr yield +3.4 bps to 4.418%. On the SOFR strip, all contracts from SFRU6 to SFRU8 were -2 to -2.5. Standout option trade was on SFRZ5: new buyer of 60k SFRV5 9618.75/9643.75 c spd for 4.5. Settled at 4.5 ref 9607.5. For this call spread to fill, the market needs to perceive a FF target of 3.5% or lower; i.e. at least 75 bps of ease from here. Oct options settle 10-Oct, so the only FOMC with a known outcome will be Sept 17. The October meeting is 29-Oct, followed by 10-Dec. By the way, Aug FF settled 9567.75. A cheap lotto ticket for a possible ease tomorrow, but the market is convinced of a Fed hold.
–SFRZ5 futures also added 35k new positions even though the net change was only -0.5. Total Z5 open is 1.35 million. On the day, vol was down across the board in rates, with many SOFR straddles easing 1.5 to 2 bps. Somewhat surprising given the heavy news schedule.
–On the weekend I noted BLS New Tenant Rents fell an astonishing 9.3% in Q2, but I couldn’t find the source data. I did find yesterday but had to dig a bit. If it’s not an outlier then inflation’s going down. Zillow link shows a bit more context:
https://en.macromicro.me/collections/5/us-price-relative/49740/us-cpi-rent-zillow-rent-yoy
–A clip on BBG noted:
$6,835 Underwater + $49,000 Cars + 7-Year Loans = Financial Wall
The auto affordability crunch is hitting new extremes: buyers were $6,835 underwater on average with their trade-ins in June.
Maybe it’s been this way for a long time, but $6800 deficit strikes me as being quite large, compounded by rising delinquencies.
–Another fun clip from BBG notes speculative interest in UK 2061 gov’t bonds. Originally issued in 2020 or 2021, these 40 year gilts had an original coupon of 0.5% at a price of around 97. Now trading 25! There are only small coupons to be taxed and gilts are exempt from capital gains taxes, which are now at 24% for high earners. The article highlights retail interest; “…unless the UK gov’t defaults they will mature at par.” Good call mate. We’ll have a pint to celebrate…in 35 years. Maybe.
–In any case, the UK Gilt story sort of ties in with some outlier buys in US bond puts. Yesterday, US wk2 102.5p 1 paid 16k, and in the last couple of sessions there have been other similar trades. I would also note that the CTD bond on USU5 according to BBG is now 4.5% of Feb’24, which has increased the DV01 on the contract to $139. As yields rise, the CTD bond becomes longer duration…
–JOLTS today expected 7500. An article on WSJ sports this headline: AI is wrecking an already fragile job market for college grads. Consumer Confidence also today, expected 96 from 93. Consumer expectations were 69 last. Might see a bit more fragility evident in this data as well.
–QRA treasury borrowing estimate was expected to be around $850b, but was actually $1.01T. Composition of issuance tomorrow. Financing to become more heavily weighted towards bills???
–One last quick note: CME trial was won by the CME, not the B-share members. Seat prices tanked. Last trade in an IMM had been $415k, $230k offered yesterday.
Big week, low vol
July 28, 2025
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–Going into a big week vol remains near the lows with MOVE at just 82.09 and VIX 14.93. Big news over the weekend of course, was a tariff deal made between the US and EU, with the EU paying 15%. Another uncertainty eliminated (for now). Equity futures ramped to new highs. EUR has pulled back from recent highs (current 1.1664 vs last week high 1.1771). China/US negotiations were extended another 90 days.
–As can be seen by attached chart, MOVE is at the lows since the Fed’s hiking cycle began in 2022. However, lower levels occurred post-covid in 2021. Almost feels like Yield Curve Control could be in the works… This week features Quarterly Refunding Announcement with an estimate of total borrowing needs today, and, more importantly, the composition of borrowing announced Wednesday. 2s and 5s auctioned today with 7s on Tuesday. GDP and FOMC Wednesday. Payrolls on Friday.
–Friday featured slightly lower yields, with tens -2.2 at 4.384 (again, almost seems pegged to current EFFR of 4.33%). New low in red to green SOFR pack spread at just 11 bps. Reds (U6, Z6, H7, M7) settled 9674.25 and Greens (U7 thru M8) settled 9663.25. The curve steepens a bit from there, but reds and greens are both consistent with terminal Fed Funds around 3-3.25%.
–Friday featured a couple of large treasury option buys: +50k TYU5 113c for 8 covered 110-26. Settled 8 vs 110-315s. Buyer of 50k US wk-1 (this Friday, NFP) 107p for 1. Over 40 bps otm relative to futures settle of 113-19.
