Rate cut odds fizzle after jobs report
February 12, 2026
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–There are a couple of articles this morning analyzing tomorrow’s CPI release. As if it matters.
–After being led to believe payrolls would be weak, actual data showed NFP rose at a solid 130k, nearly double the expected number, with the unemployment rate falling to 4.3%. Annual benchmark revision showed a loss of 862k jobs, better than feared. Yields jumped on the release, but came back to finish only modestly higher. Ten yr ended at at 4.17, near the yield at the auction, up 2.9 bps from Tuesday. 30y auction today. Curve flattened with the 2y up 5.6 bps to 3.51%.
–On the SOFR strip, SFRM6 was weakest at -8 on the day, price of 9655 or 3.45%, compared to EFFR of 3.64%. SFRM7 was -4.5 at 9684, M8 -4.5 at 9664.5 and M9 -3.5 at 9644.0. SFRM6/M7 calendar made a new recent low at -29. Deferred one-year calendars are hovering around +20.
–Some decent size buying of TYJ options. TYJ6 111.5/112.5 strangle 53 paid for 25k and then 52 for 10k. Settled 54 ref TYM6 112-045 (had settled 58 on Tuesday). Also a buyer of 20k TYJ6 111.5p covered in size of 20k. All new positioning. Open interest rose 30k in calls and 43k in puts.
–Exit seller 75k SFRJ6 9675/9687.5cs 0.75 as easing odds evaporate. FFQ6 settled 9662.5 down 9.5 on the day. So that’s 3.375 vs EFFR of 3.64, just more than one 25 bp cut. The August contract covers FOMCs in March, April, June and July.
