Payroll Friday!
May 2, 2025
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–Payrolls today expected +135 to +140k. Unemployment rate expected 4.2% which has been the high of the cycle so far. Two years ago in April 2023 we hit the low of 3.4%. (We’ll be expecting to see interviews with Claudia Sahm this coming week, known for the Sahm recession rule).
–A strong open in rate futures yesterday was met with selling and ultimately yields ended much higher. For example, TYM5 high was 112-20+, but the settle was 111-27+. The high was the highest since early April’s tariff announcement. Outside day, closed near the low. Ten year yield rose 6 bps to 4.225%. ISM Mfg data was slightly stronger than expected at 48.7. Talk of US/China negotiations.
–The peak SOFR contract, SFRU6 also posted a reversal outside day: high of 9712.5, low of 9693 and settle near the low at 9695.5 (-10.5). On Wednesday I had mentioned the 0QU5 9750c/9650p risk reversal which settled 5.0 (17.25/12.25) vs 9702.5 ~0.55d. Early in the day yesterday, a seller of about 15k 0QU5 9712.5c at 33 to 32 near the highs (9711.5). Looks new but open interest was up only slightly. In any case, nice sale as calls settled 25.75. Vol was down across the sofr strip. Yesterday, 0QU5 9750/9650rr settled 1.0 for the call ref 9695.5 (14.5/13.5). With 55 delta that’s a slight softening of skew.
Other SOFR options included early buy of 25k 0QK5 9662.5p for 1.5 (settled 3.0 ref 9691.5). Buyer adding to earlier purchases of SFRZ5 9568.75p for 3.0 (20k) had previously paid 4.0. (settled 4.0). New buyer of 25k SFRU5 9800c for 2.5, settled 2.25 ref SFRU5 9628.0.
–Eurozone CPI 2.2% and the ECB deposit facility is 2.25%. Fed supposedly can’t ease, with FF target 4.25-4.5% and CPI 2.4.
–Atlanta Fed GDP Now for Q2 posted at +1.1% yesterday.
–How does this square with Nominal GDP up 3.4% in Q1??
https://x.com/GlobalMktObserv/status/1917934532726079581
McDonald’s sales in the US dropped by the most in 5 YEARS: US same-store sales fell 3.6% year-over-year in Q1 2025, the most since the 2020 CRISIS. This comes as consumers sharply pulled back on spending.
