Payrolls guided lower
February 11, 2026
*******************
–Yields sank to recent lows Tuesday, in front of today’s delayed Payroll report. Soft data reports yesterday, with Retail Sales 0 vs 0.4 expected, and ECI +0.7 vs 0.8 expected. Peter Navarro warned of lower employment data on the heels of Hassett’s alert the day before. The company line is that job growth is slowing due to productivity gains, but that dynamic suggests more of the pie is accruing to capital rather than labor. In any case, NFP expected 70k, rate 4.4%, with annual revisions from -850k to -1 million jobs.
–Ten year yield fell 5.5 bps to 4.141%. The peak SOFR contract shifted back one slot to SFRH7, which settled +3.5 at 9691. Near one-yr SOFR calendars all made new lows. SFRH6/H7 settled negative 50 (9641, +1.5/9691, +3.5). SFRM6/M7 settled -25.5 (9663/9688.5). While the spreads indicate that modest easing is expected later in the year, there was a buyer of about 20k SFRH6 9650/9675cs for 1.75 to 2.0. March SOFR options expire 13-march and the FOMC is on the 18th; getting above the 9650 strike would mean a shift in market perception to a STRONG expectation of ease at the March 18 FOMC. Current odds expressed by FFJ6 (9641.5 vs EFFR 3.64 or 9636) are around 20%.
–Red SOFR contracts have been capped for several years now around 9710 to 9720. I had previously thought the latest round of easing would shift that soft cap up to 9730-40, but instead, inflation concerns moved reds into a lower comfort zone of 9675/9690. A bad labor report could easily see a pop above 9700, the question is whether it holds. I think reds could hold above 9700, but I think it would come in the context of a steeper curve, i.e. blues and golds lag significantly.
–Monster liquidation sales in FVH and TYH done through blocks yesterday (taking advantage of Hassett, Navarro signals?). List is below. Open interest fell 48k in both FVH6 and TYH6 contracts. Worth noting that TUH6 was also -44k.
–Just as an aside, a couple of interesting snippets regarding gov’t policy and market pricing: First, from ZeroHedge:
But last week – after Health and Human Services Secretary Robert F. Kennedy Jr. got 18 states to ban SNAP purchases of products like soda, candy, and processed snacks – PepsiCo announced price cuts of up to 15% on Doritos, Lay’s, Tostitos, and other Frito-Lay products.
Second, from Craig Fuller at FreightWaves: Compliance [both immigration crackdown and other] is sparking tightness and pay increases for truckers, trucking firms. And “…truckload volumes on a yoy basis are UP 8%.” “…not due to importers, but rather occurring in the rust belt.”
https://twitter.com/search?q=freight%20waves&src=typed_query
BLOCKS starting at 10:44 Chicago time (11:44 EST)
ALL SALES:
25k TYH6 112-175
25k FVH6 109-112
25k TYH6 112-165
25k FVH6 109-102
10k FVH6 109-107
A little less than an hour later
20k TYH6 112-155
20k FVH6 109-100
15k TYH6 112-150
15k TYH6 112-150 (two clips at same price)
Sums to 100k TYH and 80k FVH
