‘There’ll be a little disturbance but we’re ok with that’
March 5, 2025
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“a little disturbance” is the only thing I saw regarding the Trump speech last night, and for once, he seems to be prone to “a little” understatement.
–Wild price action across markets. This morning CLJ5 is 67.08, down 1.18, right back to Nov and Dec levels from a high near 78 in mid-Jan. Long end of the treasury market is lower after reversing from new highs yesterday. (e.g. USM5 current 117-25 after a high 119-18 yesterday). German bund remains pressured after plans to ramp up defense spending. German 2/10 was 29 at the start of the year and now 52 bps. 10y bund yield 2.68%, testing the high of 2024 (2.69). The high in 2023 was just a shade under 3%.
–Treasury curve steeper yesterday. 2y down 2.5 bps to 3.955% with 10s +3 bps to 4.21%. 5/30 in US made a new recent high at 51.4, up 4.2 bps on the day. SOFR strip tells the same story: Near calendar spreads at new lows as reds led on the upside, spreads from reds forward made new recent highs, as blues and golds were weakest. Selected settles: SFRM5 +1.5 at 9598, M6 +3.5 at 9648.5, M7 -1 at 9644 and M8 -3 at 9634. M5/M6 at new low -50.5. M6/M8 at new recent high 14.5; high in January was 21.
–May FF saw renewed action. A couple of weeks ago, buyer of 110k for 9571. Exited mostly at 9573.0. Yesterday he jumped in again, buying 42k at 9577 and 10k at 77.5. Settled 9577. If Fed does NOT go in March but does ease 25 at May 7 FOMC, then FFK5 should settle 95.864. So, assuming March is dead (and it’s most certainly not!) the buys of FFK at 77 are about 50/50… 9567 is no ease, or nearly 9587 on 25 cut in May.
–Early Tuesday morning (Asian hours) there was a block sale of 78k TYM5 111-19, reportedly the largest ever. Open interest fell 124k yesterday, so appears to be profit-taking. Yesterday settlement was 111-08.
–A couple of trades to highlight: in SOFR a new buy of 60k 0QM5 (june midcurves) 9700/9750cs for 7.25 to 7.5. Settled 6.0 ref 9648.5 in SFRM6. There has been large buying of May TY calls. Yesterday a seller of 32k TYK5 112.5c vs buying 35k TY wk4 114c. Settles 40 and 7. Open int down 18k in May and +35k in week-4. TYK options expire 25-April; the calls had 33 delta. Week-4 calls have only 10d, and expire 28-March. So the wk-4 expire 4 weeks earlier; looks like he took some money off the table but kept some tail upside in case the wheels come off.
–Yesterday I had mentioned that BBY and TGT earnings might give clues on the health of the consumer. Both companies indicated little growth in sales going forward (negative in real terms). BBY -13.3% on the day. TGT -3.0%.
