World’s a Casino
April 26, 2026 – Weekly comment
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The whole world, unfortunately, has become somewhat of a casino. And you look at what’s going on all over the world, in Europe and every place they’re doing these betting things. I was never much in favor of it, I don’t like it conceptually, but it is what it is… It’s a crazy world. -DJT
From John Lothian News, an interesting summary on prediction markets and risks:
I warn that this [prediction markets] surge raises hard questions about where the line between regulated derivatives and gambling now sits, and about how much political and regulatory risk the traditional exchanges are taking on by tying their brands to a business built on betting on real‑world events.
At the donut shop: You gotta guy here, Warsh, who is touting the AI boom as a generational catalyst to increase productivity, which in turns supports the case for lower rates. Lower rates support financial asset markets which exacerbates the inequality gap, and may simultaneously boost inflationary pressures as the ‘haves’ account for an oversized share of consumption.
Currently the market is shifting to greater concern about inflation, more on that below.
From Nick Timiraos re Warsh confirmation, now that the DOJ has dropped the Powell ‘investigation’:
“…If this satisfies Tillis’s objections, then here’s what the calendar looks like for the Warsh confirmation vote: Powell’s term ends May 15, three weeks from today. The Senate is in session next week, out the following, and then back. It’s a tight turnaround, but doable.”
From ZeroHedge citing Econ Collapse Blog:
For the first time ever, the price of a pound of ground beef is now higher than the federal minimum wage in many parts of the country…
On the other hand, the federal minimum wage sits at $7.25 per hour.
Coincidentally, Home Depot is running a special on pitchforks and torches in many parts of the country…
The chart below is the 10y breakeven, which is approaching 2.50%. more or less a cap since 2023.
While I don’t consider this a particularly strong signal on future inflation, it does sync with several market signals from last week. Treasury yields from 2s to 30s rose 6 to 8 bps on the week, with 2’s 3.775%, just above the FF target range. SFRZ7 has been the peak SOFR contract (now back one slot to SFRH8) and Z7 settled 9656, down 12 bps on the week (rate of 3.44%). The high settle on Feb 27 associated with the onset of Iran attacks was 9704. The Fed’s March dot plot pegged the end-of-2026 FF target at 3.4%, indicating a 25 bp cut from the current FF midpoint of 3.625, and an end-of-2027 target of 3.1% indicating one more ease in 2027. SFRZ6 settled 9641.0 almost equal to the current midpoint, and Z7 at 9656 is nearing Z6 with Z6/Z7 one-year calendar settling at a new high for April -15.0 (+5 on the week). Anecdotal stories like the ground beef clip above tend to highlight inflationary pressures. For example the P&G earnings call cited increased input costs. On the other hand, there are widespread reports of housing price cuts, which should keep the shelter component of CPI contained. Redfin reports that the median price in March was up 1.1% yoy, while Zillow forecasts an increase of just 0.3% for home values in 2026. “According to the Realtor.com® economic research team’s latest weekly market update, new listings are surging, total inventory is rising, and asking prices continue to retreat as mortgage rates ease. …On a square-foot basis, prices dropped 2.3% year over year, the 13th straight week of declines exceeding 2%.”
In the US, the question is whether the energy price shock will translate into a durable increase in inflation, or whether the effects will be transitory and a weaker labor market will smother the economy in a blanket of disinflation. In Europe, that question appears to have resolved to the former as an energy crisis looms. On the week, the German 2y rose 13.5 bps to 2.54% (peak level from 4/7 is 2.715%). Though the ECB is expected to hold policy on Thursday, future hikes are being priced. For example, June26/Dec26 Euribor calendar printed -5.5 bps on 2/27 (9797.0/9802.5), but has since surged to +32.5 on Friday (9764/9731.5)! Same timeframe SFRM6/SFRZ6 went from -41 .0 to -7.0, less in magnitude, but US is still slightly inverted. (SFRM6 from 9653.5 to 9634.0 and Z6 from 9694.5 to 9641.0).
CLM6 settled 94.40 on Friday, +11.81 on the week.
One last interesting market tidbit brought up by Luke Gromen. In a podcast several days ago he said the USD is already being partially supplanted by gold and the yuan, and offered this evidence: “In 4 of the last 5 months as the US trade gap has narrowed, the number one export of the US has been non-monetary gold…which is going to China, Hong Kong, Switzerland.” I couldn’t find monthly data, but here’s a quarterly chart from the St Louis Fed Fred website on non-monetary gold exports:
Looks an awful lot like burning the furniture to heat the house.
(BBG) BOJ sets rates Tuesday, the FOMC is Wednesday, and the BOE and ECB on Thursday. META, AMZN, GOOGL and MSFT report Wednesday. AAPL, OWL earnings and US growth land Thursday, while Exxon posts on Friday. Treasury auctions 2’s & 5s Monday and 7s on Tuesday.
OTHER THOUGHTS / TRADES
There were decent size SOFR option trades in both directions last week. An add to long 0QZ6 9750/9800cs for 3.25. Settled Friday 3.5 vs 9656.0, total position >200k.
I would also mention from Friday a buy of 23k 0QN6 9618.75/9593.75 ps for 3.5. Settled 3.5 ref SFRU7 9651.0. Expires 7/10, U7 underlying. Obviously this trade requires a fairly hard shift in market sentiment towards hikes as the top strike is 3.8125% vs current EFFR of 3.64%. However, as the euribor calendars display, that sentiment change can occur fairly quickly.
| 4/17/2026 | 4/24/2026 | chg | ||
| UST 2Y | 370.0 | 377.4 | 7.4 | wi 377.9 |
| UST 5Y | 383.8 | 391.8 | 8.0 | wi 392.3 |
| UST 10Y | 424.4 | 430.7 | 6.3 | |
| UST 30Y | 488.3 | 495.3 | 7.0 | |
| GERM 2Y | 240.5 | 254.1 | 13.6 | |
| GERM 10Y | 295.8 | 299.2 | 3.4 | |
| JPN 20Y | 326.3 | 328.4 | 2.1 | |
| CHINA 10Y | 176.7 | 175.2 | -1.5 | |
| SOFR M6/M7 | -22.5 | -11.0 | 11.5 | |
| SOFR M7/M8 | -3.0 | -10.0 | -7.0 | |
| SOFR M8/M9 | 15.5 | 13.5 | -2.0 | |
| EUR | 117.65 | 117.22 | -0.43 | |
| CRUDE (CLM6) | 82.59 | 94.40 | 11.81 | |
| SPX | 7126.06 | 7165.08 | 39.02 | 0.5% |
| VIX | 17.48 | 18.71 | 1.23 | |
| MOVE | 65.70 | 66.97 | 1.27 | |
