Rate Cut Uncertainty Receding
November 25, 2025
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–Yesterday afternoon WSJ reported that SF Fed’s Daly said she can support a rate cut in December. Daly’s not a voter, but my view is that she follows whatever Powell wants, so I view this story as a signal that Powell favors a rate cut. SFRZ5 was the strongest contract on the strip yesterday, +3.0 at 9625.5. Jan Fed Funds rose 3.5 to 9634; 100% odds of a cut would be 9637. Removal of doubt over the Dec 10 FOMC (rightly or wrongly) spilled over into rate options where vol was crushed. For example, SFRH6 9650^ settled 25.0 yesterday (9646) vs 28 on Friday (9645). 0QH5 9700^ from 40 to 38 with SFRH7 -0.5 to exactly 9700. SFRH7 is the peak contract on the strip, now at 3.0%. Worth a mention is that the 10yr breakeven (Treasury – Tip yield) closed 225.3 bps, a new recent low (long term inflation proxy).
–In TY, Jan 113.25^ settled 1’19 (Friday was 1’27 for the 113^) and the March 113.0^ was 2’21 Friday, vs 2’15 for 113.5^ yesterday. Huge longs in Jan 113.5 and 114 calls suffered. TYF6 straddles from Friday to Monday: 113.5^ from 1’36 to 1’21 and 114^ from 1’50 to 1’29.
–Q3 Advance GDP has been cancelled. However, today we get Consumer Confidence, expected 93.3 from 94.6. The plunge in this data makes today’s release important. Five year auction as well.
–This morning, there are reports that NVDA shares are under pressure due to a competitive chip threat from Google. Last I checked NVDA -5.73 or 3.2%. Another interesting decline is Softbank, this morning down 9.95% at 15390 yen. Still up huge on the year, but at the end of October it was 27315, so down 43% in less than a month.
–Related to the state of consumers: ‘…More US consumer falling behind on utility bills’
Past due balances to utility companies jumped 9.7% annually to $789 between the April-June periods of 2024 and 2025, said The Century Foundation, a liberal think tank, and the advocacy group Protect Borrowers. The increase has overlapped with a 12% jump in monthly energy bills during the same period.
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