Relentless pressure on SFRM7
May 5, 2026
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–One year forward SFRM7 made a new low Monday at 9611.5 and settled 9615.5 (-11 on the day). From the Feb 27 settle of 9706 this contract has now fallen 90.5 bps! And it is near the lowest contract on the strip, an honor now held by SFRH7 at 9613.0 or 3.87% vs EFFR 3.64%. Near SOFR calendars posted new recent highs, with M6/M7 now +19.0 (9634.5/9615.5) but M7/M8 actually made a new recent LOW of -19.5 (9614/9645) which shows that weakness is concentrated in near reds. Worth a mention is vol bid: on Friday SFRM6 9625^ settled 79.5 vs 9626.5. Yesterday the 9612.5^ settled 85.0 vs 9615.5.
–As a comparison, in early August 2022, the first red was also just above 9700. The tightening cycle of the time had taken FFs to 2.25-2.5%. By November the first red neared 9500 as the Fed continued hiking; 3.75-4.0 on Nov 2. FF now 3.5-3.75% with hiking odds growing.
–Treasury curve flattened slightly. 2y yield rose 7.6 bps to 3.962% with tens +6.5 bps to 4.442%. The thirty year bond is now above 5%, 5.01 this morning ref USM6 112-12. High yield was 5.11 in October 2023.
–Large trade SFRZ6 9637.5/612.5ps 11.75 for 25k, exit, settled 11 vs 9620.5.
–0QU /3QU 9612.5 call calendar 3.5 to 3.75 paid for 5k to buy 0QU. A bit more synthetic curve stuff going thru, mostly countertrend. This one is interesting as SFRU7/U9 settled -0.5 (9622.5/9623). Premium outlay as red midcurve straddles are nominally much better bid than deferred. 0QU6 9625^ 54.5s (9622.5), 2QU 9637.5^ 46.5 (9633.5), 3QU 9625^ 42.0 (9623).
–JOLTS Is ikely the most important data today. Expected 6850 from 6882. Would pretty much be the lowest since 2021.
–ISM Services expected 53.7 from 54.0 Trade Balance.
–New Home Sales peaked over 1 million in 2020. Since 2023 the level has been a little over 600k to around 750k. Today expected 660k.
–Quarterly refunding announcement tomorrow. Payrolls Friday expected 65k.
