Vol compression
April 16, 2026
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–From friend Art Main SOFR option summary:
“In SOFR options, volume was extremely lite (37% of 20 day ADV)”
–Interest rate vol continues to sink (normalize?). Attached chart shows MOVE and TY 1M vol. MOVE index covers the curve, 2s, 5s, 10s, 30s. In order to give a sense of quantification, I looked at TY futures straddle level on the peak (March 26), and the first red SOFR, SFRM7.
On March 26: TYK6 110^ vs 110-055 had 29 days until expiry and settled 2’01 which I marked 8.1.
Yesterday, TYM6 111.5^ vs 111-115 had 37 days until expiry, and settled 1’17 which I marked 4.5. (wk 3 which isn’t listed yet would have 29 days and be worth 1’09)
On March 26 SFRM7 9625^ vs 9623 settled 1.035 with 442 dte. Yesterday same contract with 422 days, 9650^ settled 69.5 vs 9649.5.
–Yields up yesterday with tens +2.4 bps to 4.278%. SOFR contracts down 2.5 to 3.5. Peak contracts tied Z7 and H8 at 9661.5 or 3.385%.
–Philly Fed today expected 10.0 from 18.0. Jobless Claims expected 213k.
***one other note: May CL options expire today. Option OI spread across strikes. Near current price, peak calls: 90c with just 6715 open, 95c has 11k open. On the put side 95p 9.8k and 90p 8.4k. CLM6 is already doing more volume than CLK6, with CLM6 futures last print at 89.45.
–Really had not much else to write about. Option premium in the dirt. Volume low. But then I saw that Bessent and Hassett got into a physical brawl over policy.
Grinding up the wall of no worries
April 15, 2026
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–Another low volume day with stocks and bonds grinding to new recent highs. All-time high settle in ESM6 is 7070 on Jan 12, and late price was 7004. ESM6 has rocketed over 10% higher from the March 31 low. Bonds aren’t as frothy, but the high yield in the 30y was 4.966 on March 27; at futures settle I marked it at 4.867. CLK6, having traded as high as 117.63 on April 7, was 92.18 late. The market is convinced of endless liquidity. Is it despite the backdrop, or because of it?
-Consumer Confidence at all-time low.
-Americans have never been this pessimistic about their financial situation: A record 54% of US consumers now say their financial situation is worse compared to a year ago due to higher prices.
-NFIB Small Biz Optimism at new low for this year at 95.8, which equals last year’s low. From the report: The Uncertainty Index rose 4 points from February to 92, well above its historical average of 68.
-CRE problems: properties being sold for pennies on the dollar, and private equity/credit funds under the gun.
TCW Marks Down Red Lobster Equity Stake by 98% While Keeping Private Credit Debt at Par [Grok summary]
TCW slashed the value of its equity position in Red Lobster by approximately 98% overnight, reducing shares held by a private credit fund it oversees to under $1 million since acquiring them via the restaurant’s 2024 bankruptcy. Despite the equity wipeout, TCW marked the value of its large Red Lobster debt holding, maturing in 2029, to par over five consecutive quarters
–Ten year yield fell 4.1 bps yesterday to 4.867%. On the SOFR strip, contracts in years 2, 3, 4 and 5 (reds thru golds) were up 3 to 4.,5 bps. Peak SOFR contract slipped back one slot to SFRH8, which settled 9665 or 3.35%, compared to current EFFR 3.64%. However, largest SOFR call trades appear to be exits. Example, -25k SFRZ6 9650/9675cs at 10 (settled 10 vs 9641). Same cs sold 20k vs buy 10k SFRZ6 9631.25p 3.25 to 3.5. Open interest down 39k in Z6 9650c and -17k 9675c.
–I skimmed open interest sheets this morning and volume is simply amemic. Just looking at quarterly midcurve calls:
0QN calls, 3k traded. 0QQ, 0. 0QU 550, 0QZ 50k, 0QH 0. In ALL green midcurve calls, total volume across months was just 450 contracts. So between red and green mid calls, 54k.
–In treasuries there were some put rolls out of May and into July. Sold TYK 110.5p and bought July 109.5 and 109 puts. TYU6 settled 111-12. TYN 109.5p 22s, OI +55k. TYN 109p 17s, OI +25k.
–Quick FF note: I am marking FFF7 and FFF8 on my sprdsheet. The calendar settled -52.5. (9645.5/9698). Out of whack with SFRZ6/Z7 which settled -23.5. That’s because there is ZERO open interest in FFZ8. Late quote on box: 9635.5 bid/9813.0 offer. Be careful of published prices.
Just for fun:
10 ACCIDENTAL Songs From the ’60s That Made MILLIONS!
…the soundtrack of a generation, the 1960s.
“It is a puzzling reminder that in music [and perhaps in human affairs at large], sometimes the things we throw away are the very things the world decides to keep forever.”
Some great stuff in this video. I had no idea that in-a-gadda-da-vida was supposed to refer to the garden of eden, but the singer was hammered and slurring.
Talks continue; stocks and bonds rise
April 14, 2026
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–Sunday night/Monday morning pullbacks in stocks and bonds from failed weekend peace talks were more than reversed yesterday, with ESM currently nearing the level before Iran attacks began. On Feb 25, ESM settled 7013, now 6931. One of my favorite current charts has to be Sandisk (SNDK), which ended 2025 at 237 and vaulted to a new high of 952 yesterday.
–Yields fell with 10s down 2 to 4.295%. SOFR contracts and treasuries all down 1.5 to 3 bps in yield on light volume. However there was a buyer of 50k TY wk1 112c for 11 vs 111-03 with 19d. Settled 13 vs 111-075. (Expires May 1; NFP released on 8-May).
–Late yesterday: (Bloomberg) — The Federal Reserve said Monday it will buy about $25 billion of Treasury bills each month, a greater wind down than anticipated of a program that was meant to ease short-term funding costs by rebuilding reserves in the financial system. …In December, the central bank began buying about $40b of bills each month in a bid to ease the pressures that were building in short term rates. [to make it through tax season].
–Is this slight pare back of liquidity positive? Perhaps withdrawals to pay taxes weren’t as large as expected?
–One quick SOFR note: For most of the day SFRZ6/H7 was -2.5/-2.0 though settlement was -3.0. Dec 31 is on Thursday this year, so the year-end ‘turn’ is longer than usual. (in the old ED days, Dec contracts typically traded at a discount due to year-end funding pressures). Currently, one might conclude that Dec/March is negative due to a lean toward expected easing, which is of course, reasonable. However, SFRZ appears to be trading a bit ‘rich’. SFRU6/Z6 settled -4.5, Z6/H7 -3.0, and H7/M7 -6.0. Prices: U6 9634.5, Z6 9639, H6 9642, M6 9648.0. (buy the double?)
Interesting snippet from recent DOOMBERG:
Although few Western analysts acknowledged it before the current aggression exploded into the open, Iran’s surprising performance thus far is testimony to how much progress it has made in the meantime. Aside from its world-class missile and drone production, Iran is also a significant industrial power, massively outproducing Britain in steel, cement, and ceramics. It produces about as many automobiles as Canada, but with far more localized platforms and components. Ironically, Iran is better prepared to withstand a collapse of the Western-based financial system than virtually any other country, precisely because it has been excluded from it for decades.
Markets take failed talks in stride
April 13, 2026
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–Failed Iran talks over the weekend took stocks and bonds lower overnight, but markets have fought back from the early lows. Example, USM6 low 113-03 and last 113-16 (Friday settled 113-25). ESM6 morning low 6767.00, last 6813.25, down 42 (Friday settled 6855.25). While bonds tested Tuesday’s lows this morning (last week low in USM was 113-01), ESM has barely chewed into the rally from Tuesday late afternoon. CLK6 (WTI) currently +7.73 at 104.30. Last week’s high 117.63.
–Blockade? Just take a look at Ireland. Farmers and haulers have blocked major roads mostly in protest of the price of diesel and other green policies. As one commentator put it, “the divide is between those that think globally, ‘globalists’ and those that think in national terms.” From a news article:
“None of these lads want to be here. These are working men. They should be on their farms or on the road. They can’t afford to be here, but they can’t afford not to be, either.”
–There are more stories permeating US press about budget problems of both households and municipalities. For example today’s WSJ main page has ‘Surcharges are Suddenly Everywhere – and Grumpy Americans are Paying Up’ and ‘A 50% Property Tax Hike Proposal is Tearing this Mass Town Apart’. From another news source: “Cities and towns across Massachusetts are dealing with budget shortfalls and looking to tax hikes provided by Prop 2.5 overrides to solve the issue.”
Prop 2.5 is supposed to limit annual property tax increases to 2.5% of the previous year plus growth. Shouldn’t be hard right? Inflation is right around 2.5%.
Here’s a clip from Nightingale Associates:
“Office vacancy in the Chicago suburbs rose to an all-time high of 33.4% from 22.1% in 2020, having now hit new record highs for 21 consecutive quarters.“
https://x.com/FCNightingale/status/2042413959169319190
Mythos vs Hormuz
April 12, 2026 – Weekly note
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Dominant news is that US/Iran peace talks didn’t produce an agreement.
On Tuesday, April 7, as Trump pulled back threats to wipe out Iranian civilization, SPX closed at 6617. Two days later, on Thursday, SPX was up 3.1% to 6824. On the rally, VIX plunged from 25.78 on Tuesday to 19.49 on Thursday, ending the week at 19.23 (nearing the Feb 25 low of 17.93, before the attacks on Iran).
SPX 200 DMA is 6662. A return to levels of early last week would leave an island top which would likely cap prices for the intermediate term. Closing below the 200 DMA would be negative.
MOVE index has also continued to fall. By March 26 it had surged to 115, but ended the week at 72.15. The low of this year was set in January at 55.77, which hadn’t been seen since late 2021, before the hiking cycle started. Friday’s close is lower than all levels from early 2022 to mid-2025.
Front month WTI fell nearly 15 dollars on the week, from 111.54 to 96.57. However, CLM6 was only down 8.46, from 98.04 to 89.58. In any case, last week’s price action in bonds doesn’t particularly signal inflationary fears: MOVE lower, 10y breakeven well-behaved, ending the week at 238 bps. Obviously conditions are subject to violent changes (making both MOVE and VIX seem cheap as of Friday).
The other key, and likely disinflationary, bit of news was related to Anthropic’s Mythos. Bessent and Powell summoned banking heads to discuss risks related to this particular AI model. From CBS news:
The company, the developer behind the Claude AI chatbot, said in a post on its website this week that the new tool has already uncovered thousands of weak points in “every major operating system and web browser.”
In a hopefully unrelated news item, Kraken Financial was granted a Federal Reserve master account in early March, “…the first digital asset bank to gain direct access to the Fed’s payment infrastructure.”
Jim Bianco has cited the damage in SaaS, noting that the index was down 11.46% in the last three days of the week. He posted the top 10 stocks in terms of weight. I have added the declines over the past week. In a week when the SPX rose 3.6%, every stock below was down except for APP.
1PANW (Palo Alto Networks)4.69% -4.65%
2CRWD (CrowdStrike)4.44% -5.0%
3PLTR (Palantir)4.35% -13.7%
4SNPS (Synopsys)4.30% -0.9%
5MSFT (Microsoft)4.20% -0.6%
6CRM (Salesforce)4.11% -11.9%
7ADBE (Adobe)4.04% -7.2%
8INTU (Intuit)3.99% -16.9%
9NOW (ServiceNow)3.92% -18.6%
10 APP (AppLovin)3.73% +1.3%
Last week’s UofMich Consumer Sentiment number was the lowest ever at 47.6. In the K economy, it’s the upper echelon that supports aggregate consumer spending. I would argue that tech equity values are the primary pillar, and data related to AI vulnerabilities (as above) undermines the top spenders.
US ten-yr yield ended little changed on the week at 4.315%. (High of hiking cycle was 4.99% in 2023). However, new high in 10y JGB 2.428%. Started 2025 around 1.10. Last time here was 1997. 2y Japan yield also at a new high 1.395%, suggesting a BOJ hike at month’s end. German 10y bund at 3.056% remains pinned to its highest yield level since 2011
Beige Book released on US Tax Day, April 15.
| 4/2/2026 | 4/9/2026 | chg | ||
| UST 2Y | 379.4 | 379.9 | 0.5 | |
| UST 5Y | 394.5 | 393.9 | -0.6 | |
| UST 10Y | 430.7 | 431.5 | 0.8 | |
| UST 30Y | 488.4 | 491.2 | 2.8 | |
| GERM 2Y | 261.2 | 259.8 | -1.4 | |
| GERM 10Y | 299.1 | 305.6 | 6.5 | |
| JPN 20Y | 326.3 | 331.4 | 5.1 | |
| CHINA 10Y | 181.4 | 180.8 | -0.6 | |
| SOFR M6/M7 | -10.5 | -13.5 | -3.0 | |
| SOFR M7/M8 | -9.0 | -9.5 | -0.5 | |
| SOFR M8/M9 | 12.5 | 12.5 | 0.0 | |
| EUR | 115.39 | 117.28 | 1.89 | |
| CRUDE (CLK6) | 111.54 | 96.57 | -14.97 | |
| SPX | 6582.69 | 6816.89 | 234.20 | 3.6% |
| VIX | 23.87 | 19.23 | -4.64 | |
| MOVE | 84.41 | 72.15 | -12.26 | |
Less volatile price churning ahead
April 9. 2026
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–CLK6 settled 94.41 yesterday and is about $3 higher this morning. May/June spread is 6.80; CLM6 is just below $91. US rates declined on the tentative ceasefire, with tens ending -5.4 bps at 4.287%. Implied vol was crushed. With a little over 2 weeks to go, May TY atm straddle went from 1’09 at Tuesday’s settle to 1’01 yesterday and USK6 atm straddle from 2’10 to 1’60. SOFR straddles eased a few bps. April SOFR midcurves expire tomorrow, 0QJ6 9650^ settled 8.5 vs 9646.5 in SFRM7.
–Today’s news includes PCE prices, m/m expected +0.4 with Core also 0.4. Yoy expected 2.8 vs 2.8 last with Core 3.0 vs 3.1. Jobless Claims 210k. GDP for Q4 expected +0.7, same as the second estimate which was released mid-March. 30y auction.
–Near one-year SOFR calendars edging slightly more inverted again. For example, SFRU6/SFRU7 settled -22 (9632.5, +2/ 9654.5, +6), from -18 Tuesday. Low settle on this spread was -28.5 on 27-Feb. By comparison, SFRM6/M7 settled -52.5 on 27-Feb, and -14.5 yesterday. Front end of the SOFR curve is pretty much pegged to current EFFR at 3.64%. SFRM7/U7 is the most inverted 3-mo calendar at -8 (9646.5/9654.5). Fed is being priced with a small bias toward forward easing.
–Kalshi post from yesterday makes me think CME will resusitate its NFP contract first intro’d in March 2008:
“BLOCK trades are active on the platform…seeing a lotof $20-$30 million trades for payroll hedging”
Ceasefire roller coaster
April 8, 2026
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–Ceasefire announcement sparked huge moves.
CLK6 95.09, -17.86. Halfway back from late Feb low (61.92) on CLK to yesterday high is 89.18 (low this morning 91.05). CL May/June calendar from 13.94 yesterday to 8.22.
ESM6 now 6833, +176.25. High on Feb 25 was 7035, 3/31 low 6353. The high of the year on 1/28 was 7096.50 so from year’s high to low 0.618 is 6812, currently above that level.
10y yield now 4.247, down nearly 10 bps from the 3pm level at futures settle (4.341). Feb 27 low to 3/27 high was 3.941 to 4.43, Halfway back is 4.19 which should be strong yield support. In futures the 50% retrace is 111-31, currently 111-17. Ten year auction today followed by 30s tomorrow. Thirty year yield now 4.85 from 4.92 at futures settle.
Gold has rallied but upside appears to have run out of steam.
Red SOFR contracts leading the way. Peak contract as of yesterday’s settles was SFRZ7 at 9654.5 or just below 3.5%. This morning Z7 prints 9664.5 +10, but SFRM7 is +12.5 at 9652.5. Short end rally is fairly muted.
FOMC minutes this afternoon.
Household Net Worth and the Fed’l Govt
April 6, 2026
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I am always amazed by this chart (in past few years anyway). The solid blue line is US Household Net Worth. The dotted blue line is Household Liabilities.
I don’t know that this is American exceptionalism, but it certainly does seem extraordinary. Assets simply levitate while liabilities barely move. I’m not drawing conclusions; just observing.
Consider this data from the thin grey recession line in 2020.
At the dip in Q1 2020, HH Net Worth was $109.8T. HH Total Liabilities were $16.6T. As of Q4 2025, HH Net Worth is $184.1T while Liabilities rose to $21.5T or $4.9T increase. Astonishing numbers in a way, average increase in Net Worth of about $12T per year over six years. Obviously supportive of consumer spending.
*data not from chart, but from this table:
https://www.federalreserve.gov/releases/z1/dataviz/z1/balance_sheet/table/
Breaks down in this way:
NON-Financial Assets, Q1 2020, $39.6T, Q4 2025, $61.7T, an increase of $22.1T. By the way, home mortgages are the largest liability against non-fin assets, but that number has only gone from $10.4T in Q1 2020 to $13.8T in Q4 2025. That accounts for 70% of the total increase in liabilities!
FINANCIAL Assets, Q1 2020, $86.8T, Q4 2025, $143.9T, an increase of $57.1T.
| Q1 2020 | Q4 2025 | chng | ||
| Household Net Worth | 109.8 | 184.1 | 74.3 | |
| Financial Assets | 86.8 | 143.9 | 57.1 | |
| Non-Financial Assets | 39.6 | 61.7 | 22.1 | |
| Household Total Liabilities | 16.6 | 21.5 | 4.9 | |
| Federal Gov’t Debt Level | 23.0 | 33.9 | 10.9 |
In some ways it seems like growth in the US Fed’l Gov’t deficit is partially respnsible for pumping up private (top of K) assets while the debt goes onto the Federal ledger.
The first QE wasn’t inflationary because it pumped stocks and financial assets. In COVID it WAS inflationary because of direct transfers to consumers and the enormous size of gov’t stimulus. Could it possibly be the case going forward that money gets driven into productive domestic factories and physical investment? Might suggest a more durable economic base going forward, perhaps partially at the expense of financial markets.
Table: USD amount outstanding levels of debt, US Gov’t highlighted
Industrial Strength?
April 6, 2026
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–Yields edged higher on Friday’s shortened session as Payrolls exceeded expectations. NFP +178k vs expected 65k. Previous month revised lower but the 3-month average was a respectable 68k. Unemployment rate fell to 4.3%. On the SOFR strip SFRH7 and M7 were weakest, down 7 on the day at 9632.5 and 9637.5, essentially equal to EFFR of 3.64%. USM6 contract fell 12/32 to 113-18 while WNM6 (Ultra bond) settled 116-10, down 11 or about 2 bps. (Curve flattened)
–CLK6 (WTI) made a new high last night at 115.48 but last is 110.70. Rates are little changed from Friday and stocks are marginally higher.
–ISM Services today expected 54.9 from 56.1. Inflation data to cap the week, with PCE prices Thursday and CPI Friday (yoy CPI expected 3.4% from 2.4% from energy shock).
–Interesting post below from Craig Fuller @FreightAlley.
Conclusion:
“Bottom line: Flatbed + rail strength confirm that the US is experiencing some of the strongest industrial signals in years.”
https://x.com/FreightAlley/status/2040455479860638041
Don’t Move
April 4, 2026 – Weekly note
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Last week I suggested that US Military/Industrial Policy requires low long-term funding rates, and a gov’t/industry pact (maybe overt, maybe covert) to ensure funding for long-term critical projects.
The ultimate irony would be Warsh coming in as Fed Chair and EXPANDING the Fed’s Balance Sheet, partially in response to the energy shock depressing demand, and partially to cap long rates. Small odds, but then again, Fed Chairs typically are tested at the start of their terms. Greenspan with the 1987 crash, Bernanke with subprime, Yellen (not really) Powell, with everything under the sun. (in Q4 2018 SPX fell 20%).
Warsh was on the Board during the GFC from early 2006 to 2011. He said in retrospect that the Fed at that time was justified in QE and unconventional policies due to emergency. His criticism is that the measures were left in place too long. So…IF the Fed again has to act decisively in an emergency, I don’t think Warsh will hesitate.
Even though employment was released Friday (NFP higher than expected +178k but previous revised down by 41k, with rate 4.3%), the data in chart above is from Thursday, April 2. Market moves in futures on Friday were relatively muted on the data. WNM6 (ultra-bond) ended -11/32 at 116-10, up about 1.9 bps, equiv to around 4.90 in US 30y.
Since surging to a high with the onset of US/Israel campaign against Iran, MOVE index (white line on chart) has retraced significantly. The MOVE index measures vol across the treasury curve (only 20% is weighted in 30y yield), but it’s somewhat interesting that the 30y yield has also pulled back from new highs. In my opinion, this chart is NOT sending a signal of inflationary concerns related to surging energy costs.
Consider as well the chart above. In purple is the 10y Breakeven (10y – TIP). At a current 237 bps it’s around the middle of the year’s range. Doesn’t appear especially worrisome with respect to long-term inflation expectations at the moment. I can’t recall who to attribute this next idea to, but I had read that 10/30 is probably the best measure of term premium. The white line is 10/30 and that spread is now just 56, having rejected 70 in August and December. Again, the measure is not showing stress relating to a surge in long yields or in term premium. (in 2010 and 2011, 10/30 spread exceeded 140. Recent highs are mid-80 in 2016 and 2021).
Of course, it all can change on a dime. But for now, the US bond market just isn’t showing panic. Not in vols and not in spreads. I would also mention that weakness in precious metals off the highs might well be a correlated move that suggests we’ve passed ‘peak panic’.
Of course, MOVE can surge on an unexpected yield decline. The relative stability in the long end of the treasury market is probably a source of support for equities, and I would opine that’s especially so for companies involved in critical domestic manufacturing projects. Now, it’s a question of supply chains and final domestic demand holding up.
Below is a spread chart of contracts I happen to watch, FFQ6 and FFJ7. I use August 2026 as the first, because it’s a clean month. Warsh will probably chair June 17 and July 29 meetings. Then there are 5 FOMCs between these two contracts of Aug’26 and April’27 (9/16, 10/28, 12/26, 1/27, 3/17).
In January, the spread was around -20, ~ one 25bp ease. At the start of Iran, it hit -43, so closer to 2 eases. FFJ7 actually traded below 3%. Now, the spread is near 0, with FFQ7 9636.5 or 3.635% and FFJ7 9638.0 or 3.62%. Both contracts have gravitated to the current Fed Effective rate of 3.64%. Message: In the month of March, they’ve taken EASING expectations out of this forward spd, but are not quite shifting toward hikes (associated with potential inflation pressures).
News this week is capped by inflation data:
Thursday
PCE Prices expected 2.8% yoy from 2.8% with Core 3.0% from 3.1%
Friday
CPI m/m 1.0 from 0.3 with yoy 3.4% from 2.4%. Core CPI m/m 0.3 from 0.2 with yoy 2.7 from 2.5.
| 3/27/2026 | 4/2/2026 | chg | ||
| UST 2Y | 391.2 | 379.4 | -11.8 | |
| UST 5Y | 406.8 | 394.5 | -12.3 | |
| UST 10Y | 443.6 | 430.7 | -12.9 | |
| UST 30Y | 498.0 | 488.4 | -9.6 | |
| GERM 2Y | 267.0 | 261.2 | -5.8 | |
| GERM 10Y | 309.2 | 299.1 | -10.1 | |
| JPN 20Y | 325.5 | 326.3 | 0.8 | |
| CHINA 10Y | 181.4 | 181.4 | 0.0 | |
| SOFR M6/M7 | -3.0 | -10.5 | -7.5 | |
| SOFR M7/M8 | -14.5 | -9.0 | 5.5 | |
| SOFR M8/M9 | 13.5 | 12.5 | -1.0 | |
| EUR | 115.09 | 115.39 | 0.30 | |
| CRUDE (CLK6) | 99.64 | 111.54 | 11.90 | |
| SPX | 6368.85 | 6582.69 | 213.84 | 3.4% |
| VIX | 31.05 | 23.87 | -7.18 | |
| MOVE | 111.95 | 84.41 | -27.54 | |
