Daily Macro US
pos-017 fair value
61 (FROZEN)
Arithmetic says 65 on a 13.6bp barrier. The Aug 25 standing rule blocks the increase because the 5.00% check still fails - 34.0 model vs 17.0 market, 17pp, WIDER than yesterday
July PCE (released)
3.7% YoY / 0.2% MoM
Core 3.3% / 0.2%. Hotter than the 3.6% consensus we published. Cleveland nowcast had 3.65% and 3.29% core - closer than consensus on every line, and slightly low
GDPNow Q3
4.6%
Up from 4.0%, verified at source, updated Aug 26, next update Sep 1. Durable goods +1.1% vs +0.5% expected. Real consumer spending FLAT after +0.4% in June
10Y Treasury
4.664%
+2.5bp, Aug 26 settle. Armed trim rule CHECKED and NOT triggered: needs two consecutive settles below 4.60%, and neither Aug 25 (4.639) nor Aug 26 (4.664) qualifies
Brent crude
$85.71
Aug 26 SETTLE was $87.84, -0.8%. CORRECTION: yesterday we printed $84.90 as -4.2% on the day; that was an intraday level. $85.71 is a live Aug 27 quote, labelled as such
Book
+$100.82 (CARRIED)
5 open, $332 staked; +$611.08 realized, 11/14. Polymarket unreachable all session, so this is yesterday's mark, NOT a fresh one. No trades
Yesterday we wrote that a rule which only ever blocks good news for us is doing its job. Today it blocked some, and we are going to lead with that. The 10-year settled at 4.664%, up 2.5 basis points, which narrows the distance to 4.80% from 16.1 basis points to 13.6. Run through the same model, that is a fair value of 65 on pos-017, four points better than the 61 we published yesterday. We are not taking it. The standing rule we wrote on Aug 25 says no fair-value INCREASE on this position until the 5.00% consistency check reproduces, and today it does not - the model gives 34.0 on that leg against a 17.0c market, a 17pp gap, wider than yesterday's 14.1pp rather than narrower. So pos-017 stays marked at 61 while the arithmetic says 65. That is the second consecutive session in which our own process has cost us a favourable mark, and it is the correct outcome. A rule you suspend the first time it is inconvenient is not a rule. Second: the provisional flags come off. We published yesterday's letter four hours before the data and said every fair value in it was provisional. Here is the scoring. July PCE came in at 0.2% on the month and 3.7% over the year, with core at 0.2% and 3.3%. The FactSet consensus we quoted was 0.07% and 3.6% headline. Consensus was too low. The Cleveland Fed nowcast, which is the anchor this letter actually uses, had 0.15% and 3.65% headline and 0.25% and 3.29% core. It beat consensus on every line and was almost exact on core. It was also slightly low on headline, and we will say that rather than only reporting the half that flatters our method. Growth came in strong alongside it: GDPNow jumped from 4.0% to 4.6%, verified at source, and durable goods rose 1.1% against a 0.5% forecast. The one soft number, and it is a real one, is that inflation-adjusted consumer spending was flat on the month after 0.4% in June. Third, and it is another correction of ours. Yesterday we published Brent at $84.90 and described it as down 4.2% on the day. That was an intraday level; the Aug 26 settle was $87.84, which is down 0.8%. We made a version of the exact error we spent the top of yesterday's letter correcting, in the same letter. Twice in two days is a process problem, not bad luck, and the fix is below. Fourth, a data outage we have to be blunt about. Polymarket has been unreachable for this entire session - 403s on the API and blank pages on the site. Every position price in this letter is carried from yesterday and labelled. The book's +$100.82 is therefore a stale mark, not a fresh one, and no price-triggered gate could be evaluated today. We are publishing anyway, with the gaps named, rather than either skipping or quietly reusing yesterday's numbers as though they were today's.
Today's Market Moves
10Y Touches 4.8% Before 2027 (pos-017)
65.5%→65.5%0.0pp
CARRIED from Aug 26 - Polymarket unavailable all session. The price is stale; the arithmetic is not. The 10-year settled at 4.664%, so the barrier narrows to 13.6bp and 2*(1-Phi(13.6/37.95)) gives 72.0% raw and 65.1 after the usual haircut. That is a 4-point upgrade we are refusing to book, because the Aug 25 standing rule blocks any FV increase until the 5.00% consistency check reproduces, and today it moved further away from reproducing. FV stays 61.
10Y Touches 5.00% Before 2027 (watchlist)
17.0%→17.0%0.0pp
CARRIED from Aug 26 - Polymarket unavailable all session. On the fresh 10-year the model gives 37.6% raw and 34.0 after haircut against a carried 17.0c market - a 17pp gap, wider than yesterday's 14.1pp. We should be doubly careful here: with the market leg carried, we cannot even run the check cleanly today. An unresolvable check is not a passed check, so the rule's default holds and the pos-017 upgrade stays blocked. Third consecutive session this leg is refused.
Zero Fed Rate Cuts in 2026 (pos-013)
86.45%→86.45%0.0pp
CARRIED from Aug 26 - Polymarket unavailable all session. FV restored 87 -> 88, reversing yesterday's oil-driven cut, and the reason is data rather than price. Core PCE printed 3.3% YoY, GDPNow went 4.0% to 4.6%, durable goods beat, and the Cleveland August core nowcast moved UP to 3.40% from 3.34%. That is not a committee acquiring a cutting case. The honest offset is flat real consumer spending, which we treat below as the genuine bear argument rather than a footnote.
Fed Rate Hike in 2026 (pos-010)
56.5%→56.5%0.0pp
CARRIED from Aug 26 - Polymarket unavailable all session. FV 53 -> 54, a partial reversal of yesterday's cut and deliberately partial. The inflation and growth data argue for a hike; crude settling at $87.84 and trading $85.71 argues against. Those two genuinely point in opposite directions and we are not going to pretend the data resolved it. We remain marked above our own number on a carried price we cannot verify.
Fed Rate End 2026 = 4.0% (pos-011)
31.05%→31.05%0.0pp
CARRIED from Aug 26 - Polymarket unavailable all session. FV 29 -> 30, tracking the pos-010 restoration exactly as yesterday's cut tracked the pos-010 cut. The mechanical link is the point: this bucket is the one-hike outcome, so it moves with our hike probability and not independently of it. Efficiency review still armed at 40c and unevaluable today.
US Unemployment 2026 >= 5.0% (pos-004)
12.5%→12.5%0.0pp
CARRIED from Aug 26 - Polymarket unavailable all session. FV on the YES unchanged at 8, and GDPNow at 4.6% makes it slightly harder to argue for, not easier. Tomorrow is the position's only real event: the BLS preliminary benchmark payroll revision at 10:00 ET, the same hour Warsh gives his first Jackson Hole keynote. Last year's benchmark took 2025 payrolls down 911k, so a large negative revision is well within precedent and would not by itself move the unemployment rate.
Screening Table
| # | Market | Expiry | Market Price | Fair Value | Gap (pp) | Direction | Volume | Confidence |
|---|---|---|---|---|---|---|---|---|
| 1 | 10Y Touches 4.8% Before 2027 | Dec 31 | 65.5% | 61% | -4.5pp | HOLD $25 YES - arithmetic says 65, our own rule freezes it at 61; price carried, gates unevaluable | $$60K on the leg | 3/10 |
| 2 | Zero Fed Rate Cuts in 2026 | Dec 31 | 86.45% | 88% | +1.6pp | HOLD $82 YES - FV restored 87 -> 88 on hot PCE, GDPNow 4.6% and a rising August core nowcast | $$7.5M | 4/10 |
| 3 | US Unemployment 2026 >= 5.0% | Dec 31 | 12.5% | 8% | +4.5pp | HOLD $100 NO - benchmark payroll revision and Warsh both tomorrow 10:00 ET | $$123K on the leg | 4/10 |
| 4 | Fed Rate Hike in 2026 | Dec 31 | 56.5% | 54% | -2.5pp | HOLD runner $100 YES - FV 53 -> 54; hot data and falling crude genuinely disagree | $$7.95M | 3/10 |
| 5 | Fed Rate End 2026 = 4.0% | Dec 31 | 31.05% | 30% | -1.05pp | HOLD $25 YES - FV 29 -> 30 tracking pos-010; too small to trade around | $$1.37M on the leg | 3/10 |
Market vs Fundamentals
Market Price (red) vs Estimated Fair Value (green) — %
Top 5 Opportunities
1
10Y Treasury Touches 4.80% Before 2027 - our own rule just cost us a four-point upgrade, and we are keeping the rule — YES
↑ BUY YES-4.5pp
Market price
65.5%
Fair value
61%
Gap: -4.5pp
The 10-year settled at 4.664% on Wednesday, up 2.5 basis points. The barrier to 4.80% is therefore 13.6 basis points rather than the 16.1 we used yesterday, and with 90 sessions left the horizon sigma is 37.95bp. The model returns 72.0% raw and 65.1 after the standard haircut. That is a fair value of 65 against a carried market of 65.5 - roughly fair, and four points better than the 61 we published yesterday. We are not booking it. On Aug 25 we wrote a standing rule: no fair-value increase on this position until the 5.00% consistency check reproduces. Today that check is further from reproducing, not closer - the model gives 34.0 on the 5.00% leg against a 17.0c market, a 17pp gap versus 14.1pp yesterday. There is an additional reason to hold the line. With Polymarket down, the 17.0c we are testing against is itself a carried price. We cannot run the check properly today, and an unresolvable check is not a passed check. So the position stays marked at 61 while our own arithmetic says 65, and we are carrying a four-point unfavourable distortion in our published book because we said we would. The armed trim rule was also checked and did not fire. It requires two consecutive settles below 4.60%; Aug 25 settled 4.639% and Aug 26 settled 4.664%, so neither session qualified. The rule stays armed and unchanged.
▵ Bull case
- On today's verified 10-year the barrier is 13.6bp over 90 sessions, and the model has the touch at 72% raw before any haircut.
- Our own arithmetic says this is worth 65 and we are carrying it at 61, so the published mark understates the position on our own numbers.
- The Treasury buyback window expires Nov 4 while the barrier runs to Dec 31, leaving roughly two months without the backstop that has capped the long end three times this month.
- Hot core PCE at 3.3% and GDPNow at 4.6% are the macro combination that pushes long yields up, not down.
▿ Bear case
- The 5.00% consistency check has now failed three sessions running and the gap widened today. We do not fully trust the model that is producing all of these numbers.
- Every price in this section is carried. We cannot verify the 65.5 market, the 17.0 comparison leg, or whether our 66c take-profit bid has been touched.
- Crude keeps falling - $87.84 settle, $85.71 this morning - and the war premium leaving the long end works against the barrier.
- Real consumer spending was flat in July. A consumer that stops spending eventually pulls yields down regardless of what the inflation print says.
2
Zero Fed Rate Cuts in 2026 - the data came in and it argued our way, so we are putting back the point we took off yesterday — YES
↑ BUY YES+1.6pp
Market price
86.45%
Fair value
88%
Gap: +1.6pp
Yesterday we cut fair value from 88 to 87 because crude had fallen 10% and we said we would not run a position where every new fact gets read as confirmation. Today the facts came in and they were hawkish, so the point goes back on. Core PCE printed 3.3% year on year and 0.2% on the month, above the consensus we had published. GDPNow moved from 4.0% to 4.6%, verified at source. Durable goods rose 1.1% against a 0.5% forecast. And the Cleveland Fed's August nowcast, refreshed yesterday, moved UP rather than down: core PCE 3.40% year on year against 3.34% the day before. A disinflation that shows up in the oil price but not in the core nowcast is not yet a disinflation a committee can cut on. The genuine counterweight, and we want to give it its proper weight rather than bury it, is that inflation-adjusted consumer spending was flat in July after rising 0.4% in June. That is the first datapoint in weeks that describes a real economy losing momentum rather than a commodity repricing, and it is the mechanism by which this position actually loses: not through inflation falling, but through the economy weakening enough that the committee cuts into it. One session of flat real spending is not that. But it is the number we will be watching, and if it repeats it will do more damage to this thesis than the oil price has.
▵ Bull case
- Core PCE at 3.3% YoY against a 2% target, and the print came in above consensus rather than below it.
- GDPNow Q3 at 4.6%, up from 4.0%, verified at source. Four and a half percent annualised growth is not a cutting environment.
- The Cleveland August core PCE nowcast ROSE to 3.40% from 3.34%, so the forward path is not improving either.
- Durable goods +1.1% against +0.5% expected, with orders up in four of the last five months.
▿ Bear case
- Inflation-adjusted consumer spending was FLAT in July after +0.4% in June. This is the real bear case and it deserves more attention than the oil price got.
- At a carried 86.45c the contract pays about 1.16-to-1, so there is very little left to win and the whole stake to lose.
- Crude down roughly 9% from Friday still feeds headline inflation lower over the next couple of months.
- The price itself is carried and unverifiable today, so we do not actually know where this contract is trading.
3
US Unemployment 2026 >= 5.0% - everything this position cares about happens tomorrow at 10:00 ET — NO
↑ BUY YES+4.5pp
Market price
12.5%
Fair value
8%
Gap: +4.5pp
Price carried at 12.5 and unverifiable. The NO is worth 87.5c against an entry at 75c for +$16.67, on yesterday's mark. The facts moved slightly in our favour and not by a route the market will notice: GDPNow at 4.6% makes a 0.9 point rise in unemployment by December harder to construct, not easier, and durable goods orders up in four of the last five months is not the profile of an economy shedding 1.4 million jobs in four months. Tomorrow is the entire event risk. At 10:00 ET the BLS publishes the preliminary annual benchmark revision to establishment payrolls, and at the same hour Warsh delivers his first Jackson Hole keynote. On the benchmark, the useful precedent is that last year's revision took 2025 payrolls down by 911,000, and Cleveland Fed research notes the resulting benchmark move sat only marginally outside the BLS's normal range. So a large negative number is both plausible and, in context, less dramatic than the headline will make it sound. More to the point for us: a benchmark revision restates the level of past payroll growth. It does not change the household-survey unemployment rate, which is what this contract settles on. That distinction is the whole position. The risk we accept is that the market may not observe the distinction tomorrow, and a scary headline could move the price against us regardless of whether it moves the underlying probability.
▵ Bull case
- The contract settles on the household-survey unemployment rate. The benchmark revision restates establishment-survey payroll levels. They are different surveys.
- GDPNow at 4.6% and durable goods up in four of five months describe an economy that is accelerating, not shedding employment.
- Getting from 4.1% to 5.0% by December requires roughly 1.4 million additional unemployed in four months.
- Even on the carried mid of 12.5 the bid was 11.4 yesterday, so the traded level is closer to our fair value than the mid suggests.
▿ Bear case
- A 900k-plus downward benchmark revision would produce alarming headlines, and prices can move on headlines whether or not the underlying probability changes.
- Warsh speaking at the same hour doubles the chance of a disorderly reaction in a thin contract.
- Our 4.5pp gap is under the 10pp bar, meaning we would not open this position today at this price.
- The price is carried and we could not evaluate the sub-8c review line even if it had been reached.
4
Fed Rate Hike in 2026 - the data says hike and the oil price says do not, and we are not pretending that got resolved — YES
↑ BUY YES-2.5pp
Market price
56.5%
Fair value
54%
Gap: -2.5pp
We cut this from 55 to 53 yesterday on the crude collapse. Today we put back one point, not two, and the reason for the partial move is that the two main inputs now genuinely disagree. Arguing for a hike: core PCE at 3.3% and above consensus, headline at 3.7% and not falling, GDPNow at 4.6%, durable goods beating, and a Cleveland August core nowcast that ticked up rather than down. Three FOMC members already dissented in July in favour of hiking. Arguing against: Brent settled at $87.84 and is trading $85.71 this morning, roughly 9% below Friday, and that will pull headline inflation down over the next couple of months whatever the July data said. Flat real consumer spending points the same way. We do not think today's data resolved that, so we are not marking as though it did. FV 54, still below the carried market of 56.5. Tomorrow matters more than any of it. Warsh has begun his term with an explicit bias against forward guidance, which cuts both ways for this contract: he is unlikely to promise a hike, and he is equally unlikely to rule one out. The specific risk we have flagged since Monday is unchanged - if he signals a preference for accelerated balance-sheet runoff over rate increases, a hawkish chair turns out to be bearish for a contract that only pays on the rate.
▵ Bull case
- Core PCE 3.3% YoY, above consensus, with the Cleveland August nowcast rising to 3.40%.
- GDPNow 4.6% and durable goods +1.1% remove the growth objection to hiking.
- Three July dissents in favour of a hike, and that bloc has now been handed a hot inflation print.
- Tariff arithmetic untouched: 50% on roughly $20bn of Canadian goods with carve-outs, and Carney's retaliation from Sep 8.
▿ Bear case
- Crude roughly 9% below Friday feeds headline inflation lower into the autumn, which is the window this contract settles in.
- Flat real consumer spending is the kind of number that stops a committee hiking regardless of the inflation print.
- Warsh's stated aversion to forward guidance means tomorrow is unlikely to deliver the confirmation this contract needs.
- We are marked 2.5pp above our own fair value on a price we cannot verify today.
5
Fed Rate End 2026 = 4.0% - it moves with our hike probability by construction, so it moves back up today — YES
↑ BUY YES-1.05pp
Market price
31.05%
Fair value
30%
Gap: -1.05pp
FV 29 back to 30, tracking the pos-010 restoration from 53 to 54 exactly as yesterday's cut to 29 tracked the cut to 53. We want to be explicit that this is mechanical rather than an independent judgement. The 4.0% bucket is the one-hike outcome, so its fair value is a function of our hike probability. Marking it independently would let us tell ourselves two different stories about the same event, which is the specific failure mode this book is most exposed to given how correlated its positions are. The price is carried at 31.05 and unverifiable. On that carried number we are roughly a point rich, which is inside any reasonable error bar on a leg like this. Nothing to do. A $25 ticket in a market doing a few hundred dollars a day costs more in spread to exit than the gap is worth, which we have said every day this position has been open and will keep saying.
▵ Bull case
- Hot core PCE and a 4.6% growth nowcast raise the odds the committee moves at all, and one hike is the most likely version of moving.
- The stake is $25 against a $332 book, so the outcome barely registers either way.
- Resolution is mechanical at year end with no ambiguity about the settlement source.
- The bucket has been stable in a 30-31 range for a week, which suggests the carried price is not badly stale.
▿ Bear case
- We are marked about a point above our own fair value on a price we cannot verify.
- Exiting costs more than the gap, so we are locked in whether the mark is good or bad.
- If crude keeps falling and the hike bid fades, the no-hike bucket at 3.75% takes share from this one.
- The whole fair value is derived from another position's mark, so any error in pos-010 propagates straight into it.