Strap in
January 26, 2025
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–Net changes in rates Friday were modest. Ten year yield -1.2 bps to 4.235%. SOFR strip from H6 to H0 +0.5 to +2.0.
–I mentioned some of Friday’s large trades in the weekend note.
+50k TYK6 109.5p 19. Settled 20 vs TYM 111-155, open interest +49k
+50k TYK6 108.5p 11. Settled 12, open interest +73k
-10 TYH5 111/112.5 strangle 26 to 25. Call settle 12 with OI +29k. Put settle 14 with OI +2k.
MOVE index ended at 56.25. It’s been lower….in September of 2021.
–Precious metals are exploding to new highs this morning. Spot gold 5088, +101 and silver 109.40, +6.21. $/yen continuing Friday’s carnage, -2.07 at 153.62. DXY is just above 97. Lows last year were 96.38 in July and 96.22 in September. Flight to safety is no longer UST. It’s gold.
–Chicago Fed National Activity expected -0.20 from -0.21. Durables. $69 billion 2y note auction. Since October, twos have been in a range of 3.43 to 3.63. Essentially capped by the current EFFR of 3.64 and supported at another 25 bp cut. That cut seems to be centered on the June 17 FOMC; FFK6/FFN6 spread settled -11.5 (9644/9655.5). Other calendars isolating Fed meetings aren’t quite as inverted: FFJ6/K6 is -4.0 (FOMC 29-Apr) and FFN6/Q6 is -6.0 (FOMC 29-July). The latter spread was sold down to -7.5 on Friday.
–In my opinion, odds (though still tiny) are increasing for Trump to be removed from office through Article 25:
Section 4.
Whenever the Vice President and a majority of either the principal officers of the executive departments or of such other body as Congress may by law provide, transmit to the President pro tempore of the Senate and the Speaker of the House of Representatives their written declaration that the President is unable to discharge the powers and duties of his office, the Vice President shall immediately assume the powers and duties of the office as Acting President.
