Told by an idiot, full of sound and fury. Signifying nothing
December 16, 2025
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–PAYROLL data today! Curve edged steeper in anticipation. New high for the year in 2/10 at 67.4 (3.506 and 4.18). 5/30 also gained 2.2 bps to 112. On the SOFR strip all back spreads made new highs. As an example, red to green pack spread is +21.625 (9681.125 & 9659.5). I have shifted to March as the lead contracts in the packs. Example, SFRH7/SFRH8 settled 19 (9687, +3.5 and 9668, +2.0). Note that ERH7/ERH8 euribor spread is 26.5 and SFIH7/H8 is 19.5. Positive forward curves indicate policy normalization in my opinion.
–With Powell having said that payroll data has probably been overstated by 60k per month, my assumption is that the market is already looking for a weak number. I.e. if it’s +40k the market will interpret it as -20k. Fair assumption? I’m not sure, but I think the outlier would be a much stronger payroll number.
–Interesting BBG article yesterday noted that Fannie and Freddie are retaining more mortgages on their books, possibly to try to influence mortgage rates lower.
–In early to mid November, there was a size buyer of TYF 113.5 and 114 calls covered. Equivalent straddle levels were 1’55 to 1’61. Total about 185k 113.5c and 175k 114c. Jan options expire 26-Dec, 113c have 144k open, settled 8. TYF 113.5c settled 4 with 254k open and 114c settle 2 with 263k open. The buyer traded in clips of 50k to 35k and appears to have adjusted strikes lower over time.
YESTERDAY, buyer 50k TYH6 113.5c for 031, 31 delta (^2’07 equiv). Likely the same buyer and likely a lot more behind.
–Heard a great line this morning:
“Music is liquid architecture and architecture is frozen music.”
Of course this is a business that’s more like Dr Seuss:
“They’ll dance with jingtinglers tied onto their heels.
They’ll blow their floofloovers. They’ll bang their tartookas.”
As the Grinch says, The one thing I hate, all the Noise, Noise, Noise, Noise!
Summary of previous TY covered call buys (I have NOT captured everything here)
TYF6 Covered Call buys
Nov 6, 2025 113.5c
+35k 0’27 vs 112-145
+50k 0’30 vs 112-180, 32d
+50k 0’32 vs 112-205, 33d
Straddle levels 1’57 to 1’55. On Friday, atm TYF6 113^ settled 1’42 and 113.5^ settled 1’50
Nov 10, 2025 113.5c
+50k 0’28 vs 112-15, 30d (^ 1’58)
Nov 11, 2025 114.0c
+50k 0’29 vs 112-305, 31d (^ 1’61)
+40k 0’29 vs 112-315, 30d (^ 1’59)
Nov 12, 2025 114.0c
+28k 0’27 vs 112-280, 29d (^1’62)
Nov 19,2025 114.0c
+50k 0’22 vs 112-245, 26d (^1’59)
Dec 16, 2025 TYH6 113.5c
+50k TYH6 113.5c 0’31 covered 112-115, 31d (^2’07)
