Stocks and Bonds hit

January 21, 2026
******************
–One-two punch of new highs in Japan bonds and Trump’s Greenland obsession roiled markets and steepened the US curve.  SPX ended -2.06% with Nasdaq -3.54%.  Two year yield edged half a bp lower to 3.593% while 30s jumped 8.1 to 4.919% (Friday to Tuesday moves).  Flight-to-quality flows into gold, which was up 3.7% to a new all time high; GCG6 settled 4765.80, +170.4.  

–Previously one might have expected more of a bid in the front end of the curve, and though the first six SOFR contract settled slightly positive (SFRU6 the leader at +2.0 to 9669.5), blues, 4^th year forward were -4.125 and golds,  5^th year, were -5.75 at 9607.0.  Once again, ten year treasury-tip breakeven squeaked to a new recent high of 235.6 bps.  There were a few notable front end call spread buys: +100k SFRH6 9643.75/9656.25cs 2.0 paid (settled 1.75 ref 9638.0) and +100k or a bit more SFRM6 9650/9656.25/9668.75/9675c condor for 1.75.  Settled 2.0 vs 9654.0.  Sweet spot between the two center strikes is 9662.5 or 3.375%, which works with just one more 25 bp ease.  Nothing indicating the possibility of panic easing by the Fed.  

–Implied vol firmed across products.  TYH6 down 10.5/32 to 111-135.  TYH6 111.5^ settled 1’09 (4.4) up from 1’06 Friday. 

–Trump at Davos today.  Speech scheduled 8:30 EST, though I saw early reports that Air Force One had a mechanical issue and turned back.  

• ABOUT:
  Former member of the CME specializing in interest rate options and yield curve strategies.

  The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results.