Daily Macro US
July payrolls
-23K
vs +83K consensus; May/June revised down 103K; the print we failed to cover on Friday
Unemployment
4.1%
Down from 4.2% — participation-driven, but it moved pos-004's way
Fed Sep Hike
34.5%
From 44.5c — the Aug 6 refusal to buy this at 44.5 saved 10 points
Brent crude
$84.39
+1% today; Iran attaches conditions to any Hormuz reopening after a -7% week
July CPI nowcast
3.42% YoY
Cleveland, Aug 7 — verified at source. Consensus 3.4%. Prints Wednesday
Book
+$97.84
5 open, $332 staked; +$611.08 realized, 11/14
Two things to report, and the first one is about us. Friday was the most important session of the quarter and this letter did not publish. July payrolls printed MINUS 23,000 against an +83,000 consensus, with May and June revised down by a combined 103,000, and we were not there. Nothing in the book needed a same-day decision and no gate was breached, so the omission cost no money — but it cost the thing this site is actually for, which is being present on the day the thesis is tested. It is logged here rather than quietly skipped. Now the market. The payroll contraction did what you would expect: Polymarket's September Fed-hike odds collapsed from 44.5c to 34.5c, our 2026-hike runner gave back 8 points to 54.5c, the S&P closed Friday at a record 7,757.64 after its best five-day run since April, the 2-year fell to about 4.2% and the 10-year to 4.641%. Average hourly earnings slipped to 3.2% year-over-year, the softest since May 2021. Curiously, the unemployment rate went DOWN to 4.1% from 4.2% — participation-driven, but it is still the number pos-004 is short, and it moved our way. Then today the oil leg came back on: Iran told Washington the Strait of Hormuz reopens only if the US ends its strikes, lifts the port blockade, withdraws forces and unfreezes assets. Brent is back to $84.39 and WTI to $78.77, both up about 1% today after losing more than 7% last week. That is the tape. The second thing to report is a correction we owe on our own analysis. On Aug 6 we cut pos-017's fair value from 62 to 55 and framed it as a coin flip. That cut was reasoning by narrative — 'both engines are off' — and not by arithmetic. Redone properly as a barrier problem: the 10-year is at 4.64% and needs to touch 4.80% ONCE in roughly 100 remaining trading sessions; with 10Y daily vol near 4bp, the reflection-principle estimate is about 69%, which we haircut to 65 for the dovish drift. Fair value is 65, not 55. The market has moved to 62.5c mid and we were the ones who were wrong, not the market. The position is +$69.7 on a $25 ticket and is once again the book's engine — but we cannot add, because our FV of 65 sits below the 66c ask on a book showing $25 of 24-hour volume. No trades today. July CPI lands Wednesday and it is the week's fork: consensus 3.4% year-over-year, Cleveland's nowcast 3.42% as of Friday, and the crowd's favourite bracket is 3.3% at 39.5c with 3.4% at only 37.5c. That looks like a gap until you size it honestly — our fair value on the 3.4% bracket is about 43, so the edge is 5.5pp against a 10pp bar, and June's $75 lesson about paying for a model's mode is still fresh. No trade. Book: 5 open, $332 staked, +$97.84 unrealized, +$611.08 realized, 11/14.
Today's Market Moves
10Y Touches 4.8% (pos-017)
52.5%→62.5%+10pp
Up 10 points and we are issuing a correction against ourselves. Thursday's FV cut to 55 was narrative, not arithmetic. As a barrier problem — 4.64% needing to touch 4.80% once in ~100 sessions at ~4bp daily vol — the estimate is ~69%, haircut to 65 for dovish drift. FV back to 65. Iran's Hormuz conditions re-armed the oil leg (Brent $84.39) and that is why the market got there before we did. No add: FV 65 is below the 66c ask, and the book is 59/66 on $25 of daily volume.
Fed Rate Hike 2026 (pos-010)
62.5%→54.5%-8pp
The position that took the payroll hit, correctly — a negative jobs month should lower the odds of any 2026 hike. Back to flat versus the 55c entry. It holds above 50c because October and December stay live; CME had October near 58% on Friday. FV cut 62 → 58. Trim 72c, floor 48c, both untouched, and half was banked at 66.5c.
Fed Sep Hike (context)
44.5%→34.5%-10pp
This is the receipt on Thursday's refusal. We flagged an unverified 12pp gap that would have had us BUYING September hike exposure at 44.5c; it is 34.5c today. Our rule — verification belongs to the same session as the flag — is worth about 10 points here. The gap now verifies at source in the other direction: CME FedWatch read ~44% on Friday against 34.5c, so ~9.5pp, still under the 10pp bar and still a fifth correlated hawkish ticket. No trade.
Zero Fed Cuts 2026 (pos-013)
87.55%→85.75%-1.8pp
Down 1.8 and we are cutting FV 90 → 88 rather than defending the old number. Negative payrolls with wage growth at 3.2%, the softest since May 2021, genuinely fattens the cut tail. A cut still needs a recession the data does not show — the recession market prices 7.5c — but the distribution moved and so should our estimate. Trim stays armed at 90c, now further away.
Fed Funds End 2026 = 4.0% (pos-011)
36.35%→35.05%-1.3pp
The one-hike bracket is now in a dead heat with the no-hike bracket (3.75% at 34.8c). That is the right picture after a contracting payroll month. At FV, nothing to do.
US Unemployment >=5.0% (pos-004)
10.15%→10.25%+0.1pp
The odd one out: unemployment actually FELL to 4.1% and the market for a 5.0% print ticked UP a tenth. We hold NO and are happy to be on the other side of that. From 4.1% to 5.0% in five months is a recession, not a slowdown.
Screening Table
| # | Market | Expiry | Market Price | Fair Value | Gap (pp) | Direction | Volume | Confidence |
|---|---|---|---|---|---|---|---|---|
| 1 | 10Y Touches 4.8% Before 2027 | Dec 31 | 62.5% | 65% | +2.5pp | HOLD $25 YES — FV corrected 55 → 65; no add, ask is 66 | $$25/24h | 6/10 |
| 2 | Fed Rate Hike in 2026 | Dec 2026 | 54.5% | 58% | +3.5pp | HOLD $100 — trim >72c, floor 48c | $$49K/day | 6/10 |
| 3 | July CPI YoY = 3.4% | Aug 12 | 37.5% | 43% | +5.5pp | NO TRADE — 5.5pp is under the 10pp bar; June lesson kept | $$6.2K/day | 4/10 |
| 4 | Fed Sep Hike (candidate) | Sep 16 | 34.5% | 44% | +9.5pp | NO TRADE — under bar, and a fifth correlated hawkish ticket | $$193K/day | 4/10 |
| 5 | Zero Fed Cuts 2026 | Dec 31 | 85.75% | 88% | +2.25pp | HOLD YES — FV cut 90 → 88; trim at 90c | $$3.3K/day | 7/10 |
Market vs Fundamentals
Market Price (red) vs Estimated Fair Value (green) — %
Top 5 Opportunities
1
10Y Treasury Touches 4.8% Before 2027 — YES
↑ BUY YES+2.5pp
Market price
62.5%
Fair value
65%
Gap: +2.5pp
We were wrong on Thursday and the market was right. We cut fair value 62 → 55 on a story — the war engine is off, the rate engine is idling — and stories are not probabilities. This is a barrier bet, not a level bet: the 10-year does not have to END the year at 4.80%, it has to TOUCH it once. From 4.64% that is 16bp, with roughly 100 trading sessions left and 10Y daily vol near 4bp. The reflection principle puts the touch probability near 69%; we haircut to 65 for the dovish drift out of Friday's payroll print. So fair value is 65, we published 55, and the market closed the difference before we did. Today Iran's conditions on any Hormuz reopening put Brent back to $84.39 and re-armed the leg we had written off. The position is +$69.7 on a $25 ticket. We do not add, because 65 is below the 66c ask and the book shows $25 of 24-hour volume — the mid we mark at is not a price anyone will fill in size.
▵ Bull case
- Barrier, not level — 16bp touched once in ~100 sessions is a high-probability event
- Oil leg re-armed: Iran's Hormuz conditions put Brent back above $84
- Heavy Treasury issuance calendar unchanged by a soft payroll month
▿ Bear case
- We have now moved FV 72 → 62 → 55 → 65 in three weeks; that is model instability, not conviction
- A dovish Fed caps the front end and drags the belly with it
- Liquidity is dreadful: 59 bid / 66 ask on $25 of daily volume — the mid is notional
2
Fed Rate Hike in 2026 (runner) — YES
↑ BUY YES+3.5pp
Market price
54.5%
Fair value
58%
Gap: +3.5pp
This is where the payroll print landed, and it landed correctly. Minus 23,000 jobs with 103,000 stripped out of the prior two months is a real deterioration, and it took 8 points out of a market that is simply asking whether the Fed hikes at all this year. The runner is back to flat against its 55c entry. We are not distressed about that: half this position was already sold at 66.5c, so what remains is house money, and the reason it holds above 50c is sound — September is not the only meeting. CME had October near 58% on Friday even as September fell to ~44%. The hawkish case did not die on Friday, it got pushed back a quarter. FV 62 → 58.
▵ Bull case
- October and December stay live; CME October near 58% on Friday
- Core CPI still running ~2.5% with three July FOMC hike-dissenters on record
- Half the position banked at 66.5c — the remainder is house money
▿ Bear case
- A contracting payroll month is exactly the data that stops a hiking cycle
- Down 8 points in one session; momentum is against it
- Wage growth at 3.2% removes the wage-spiral argument for hiking
3
July CPI YoY = 3.4% (candidate — not traded) — YES
↑ BUY YES+5.5pp
Market price
37.5%
Fair value
43%
Gap: +5.5pp
On the surface this is the trade of the week. Cleveland's nowcast reads 3.42% year-over-year as of Friday — verified on the source page in this session, not from a summary — and sell-side consensus is 3.4%. The model and the street agree. Yet the crowd's favourite bracket is 3.3% at 39.5c, with 3.4% at only 37.5c. Model plus consensus pointing at a bracket the crowd has in second place is the exact structure we look for. Then we sized it and it failed: our fair value on the 3.4% bin is about 43, because 3.42 sits close enough to the 3.45 boundary that a rounding coin flip is live, and because June taught us what the tails of this model look like — the nowcast said 3.92, consensus said 3.8, the print was 3.5, and that cost us $75. A 5.5pp edge against a 10pp bar is a no. We would rather publish the near-miss than quietly take a trade our own rule says is too small.
▵ Bull case
- Nowcast 3.42 and consensus 3.4 agree, and the crowd's mode is elsewhere
- Deep enough to size at $6.2K/day
▿ Bear case
- 5.5pp edge against a published 10pp bar — mechanically disqualifying
- 3.42 is near the 3.45 rounding boundary; the 3.5 bracket is live
- June: this model missed by 0.42pp and cost us the full $75 stake
4
Zero Fed Cuts in 2026 — YES
↑ BUY YES+2.25pp
Market price
85.75%
Fair value
88%
Gap: +2.25pp
The anchor eased 1.8 points and we are cutting our fair value rather than defending it. Payrolls contracted and average hourly earnings fell to 3.2% year-over-year, the softest reading since May 2021. That is a genuinely fatter tail for a 2026 cut than we had last week, and pretending otherwise would be the same mistake we just corrected on pos-017 in the opposite direction. FV 90 → 88. It stays the book's lowest-variance carry because a cut still requires a recession the data does not show — Polymarket's own recession market prices 7.5c — but the honest edge here is now about two points, not five.
▵ Bull case
- A cut needs a recession; the recession market agrees at 7.5c
- Three July FOMC hike-dissenters make an easing pivot a long walk
- Unemployment fell to 4.1% — hard to cut into a falling jobless rate
▿ Bear case
- Negative payrolls plus 3.2% wage growth is the start of a cut case
- FV cut to 88 leaves only ~2.25pp of edge
- Capital could work harder elsewhere; the 90c trim is the live decision
5
US Unemployment >=5.0% in 2026 (held NO) — NO
↓ SELL YES+1.25pp
Market price
10.25%
Fair value
9%
Gap: +1.25pp
The quiet winner of the week, and nobody noticed. Payrolls contracted, but the unemployment RATE fell to 4.1% from 4.2%. The composition is unflattering — it fell because people left the labour force, not because they found work — but this market resolves on the rate, not on the composition. We are short 5.0% and the rate moved away from 5.0%. The market's response was to tick YES up a tenth, to 10.25c, which we are happy to sell into. From 4.1% to 5.0% inside five months requires a recession, and the recession market prices 7.5c. Our early-exit review sits below 8c; we are above it, so no action.
▵ Bull case
- The rate fell to 4.1% — this market resolves on the rate
- 4.1% to 5.0% in five months is a recession; recession market at 7.5c
▿ Bear case
- The fall was participation-driven, which is not real strength
- Payroll contraction plus 103K of downward revisions is a genuine deterioration
- Long carry to December for the remaining ~$13