It was a fairly uneventful day in the market, aside from some unusual movement in the final 45 minutes. The only thing that truly matters for equities now is Nvidia’s (NVDA) results tomorrow after the close. Shockingly, the VIX 1-day sits at just 8, a level unlikely to hold. I wouldn’t be surprised to see it closer to 20, given Nvidia’s significance.

Depending on how high volatility climbs tomorrow, we could see one of those implied volatility crush rallies on Thursday—regardless of Nvidia’s outcome. But it’s difficult to say just yet.

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In the meantime, as the world waits for Nvidia, 5-year CPI inflation swaps rose to 2.64%. The Fed continues to come under pressure, with President Trump dismissing Governor Cook. What is somewhat surprising is how muted the bond market’s reaction has been to the potential changes at the Fed.

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Right now, this is resulting in a steeper yield curve, with the front end falling and the 30-year rate rising. The 30-year continues to hover around the 4.9% region and appears to be gearing up for a significant move.

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The steepening between the 30-year and 10-year is also accelerating, with the spread widening to 65 bps. Historically, the gap between the two has ranged as wide as 100 to 150 bps.

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The 30-year minus 5-year spread also appears to be widening, though much of that is due to the decline in the 5-year Treasury rate. Tomorrow brings the 5-year auction, following today’s very strong 2-year auction, which helped push yields lower. Since the 2-year is largely anchored to Fed policy, the more telling signals will come from the 5- and 7-year auctions tomorrow and Thursday, as we move further out on the curve and away from the Fed’s direct influence.

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In the meantime, the U.S. Treasury–JGB 5-year spread continues to narrow. Yet the USD/JPY keeps moving in the opposite direction of the spread. It’s unclear how much longer this can last, but it has been the notable outlier for the past four years.

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The JPY 5-year forward is also approaching a key level on the chart, suggesting the yen may continue to strengthen, and spreads could remain under pressure.

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