US DATA: Final PMIs Point To Cool Growth In Q1 So Far
February's final reading of S&P Global flash PMIs brought some slight downgrades from the flash release, including both Services at 51.7 (52.3 flash, 52.7 prior) and Composite at 51.9 (52.3 flash, 53.0 prior).
- That confirmed the weakest Services reading since April 2025 (which coincided with the US Liberation Day tariff announcements), though this series has recently diverged from the ISM Services gauge which has been accelerating in recent months. Recall that S&P Manufacturing PMI fell in February to the lowest since July 2025 (51.6 final vs 52.4 prior).
- The Composite reading implies real GDP growth of just under 1.5% Q/Q annualized, per the report, which would be steady from 1.4% in Q4 (which was considered understated largely due to government shutdown-related factors).
- A few highlights from the Services release (link):
- "muted demand conditions limited hiring activity and kept business confidence below trend"
- "Selling price inflation accelerated on the month, reflecting elevated cost pressures from tariffs and rising employee expenses"
- "New order growth extended into a twenty-second successive month but also cooled from January"
- Backlogs rose to the "greatest extent since May 2022"
- Of interest ahead of February nonfarm payrolls: "February data signaling a second successive monthly increase in headcounts. However, growth was largely associated with filling existing vacancies, and the gain in employment was only fractional amid reports that cost-cutting efforts had constrained hiring activity."
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US TSYS: Early SOFR/Treasury Option Roundup: Bullish on Rates
SOFR & Treasury options leaning bullish (except for recent 20k FVJ6 put buyer), even as underlying futures trade weaker, well off early overnight highs on heavy volumes (TYH6 already over 1.1M). Projected rate cut pricing receding vs. late Friday levels (*): Mar'26 at -3.2bp (-4.3bp), Apr'26 at -7.4bp (-8.5bp), Jun'26 at -19.9bp (-21.1bp), Jul'26 at -28.4bp (-31bp).
- SOFR Options:
- Block/SCREEN, +35,000 SFRM6 97.00 calls, 3.0 vs. 96.565/0.14%
- +20,000 SFRM6 96.43/96.62/96.75 broken call trees, 3.5
- +4,000 0QJ6 97.18/97.31 call spds, 1.0
- Block, 5,000 0QM6 97.00/97.37/97.75 call flys, 4.0
- 2,500 SFRJ6 96.37/96.50 2x1 put spds ref 96.58
- 4,000 SFRH7 97.12/97.25 call spds ref 96.83
- 4,000 SFRM6 96.25 puts vs 96.62/96.87 call spds, 4.0 net ref 96.575
- +4,000 0QG6 96.87/97.00 call spds, 2.5 ref
- -2,000 SFRZ6 96.06/96.31/96.56 put flys, 5 ref 96.84
- Treasury Options:
- 20,000 FVJ6 108.5 puts, 20
- Block, -5,000 USH6 114 puts, 31 vs. 115-04/0.32%
- 10,000 FVH6 108/108.5 2x1 put spds
- 3,300 TYH6 111/113 call over risk reversals, 2 net vs. 111-23.5/0.31%
- +1,700 TYH6 115.75 calls, 2 ref 111-31.5
- -1,600 TUH6 104.5/104.75 call spds, 1.5 ref 104-07.37/0.10%
- -3,000 USH6 114 puts, 31 vs 115-07/0.37%
- +2,500 tyh6 110.5/112.5 call over risk reversal, 14 vs. 112-00.5/0.43%
- -2,000 TYH6 112 calls, 28 vs 112-01/0.36%
- over 18,700 TYH6 111.5 puts, 14-13 ref 112-01
- over 5,400 TYH6 113 calls, 10 ref 111-31.5 to 112-00
- +2,150 TYJ6 113.5 calls, 14 ref 111-22.5
- over +6,100 TYH6 112.5 calls, 12 ref 111-27
US: Democrats Get A Midterm Boost In Texas
Democrats received two major boosts in Texas on Saturday. First, former Harris County attorney Christian Menefee won a special election runoff to fill the vacant House seat of former Democratic Rep. Sylvester Turner, who died in office last year. When Menefee is seated today, House Speaker Mike Johnson’s (R-LA) razor-thin House majority will shrink to a single-vote cushion.
- Second, Democrat Taylor Rehmet caused a major upset in the Texas state Senate, flipping a Trump-backed Republican in a district Trump won by 17 points in 2024. Axios notes, “Rehmet spent a little over $70,000 from Jan. 1-21. [MAGA opponent, conservative activist Leigh Wambsganss] spent more than $736,278 during that period.”
- DNC Chair Ken Martin said on X, “Taylor Rehmet won a huge Texas State Senate race last night, the first time Democrats took this seat in decades.... When I say we have wind at our back, Democrats, I mean it.”
- Reuters notes, “The victory for a seat vacated by a four-term Republican followed a string of wins in recent months for the Democratic Party in local and state elections across the country," including governors' races in Democrat-friendly New Jersey and Virginia and special elections in more conservative Kentucky and Iowa.
- Following the Texas result, the implied probabiltiy of Democrats flipping the House in 2026 ticked up to 83%, per Polymarket.
MNI: US JAN FINAL MANUF PMI 52.4 (51.9 FLASH, 51.8 DEC)
- MNI: US JAN FINAL MANUF PMI 52.4 (51.9 FLASH, 51.8 DEC)
