Yo Pit Crazies,

I'm curious what the Pit Crazies think about this one: I think Congress works too much.

For all the time they spend in session, what do they finish?

This Congress has nothing to show for the year except COVID era spending still running through the pipeline. Treasury borrowed $432 billion in July alone, which is $14 billion a day.

They got a D.O.G.E. hall pass last year and squandered it. Of the 30 programs the White House proposed cutting or eliminating in the 2026 budget, Congress killed exactly one. The bills that did pass spend more than the 2025 versions.

They can pass common sense voting reform and have failed at every attempt. Now there's a new sheriff in town and he won't take no for an answer: The Bond Vigilante!

The Long Bond Doesn't Need a Quorum

The 30-year Treasury yield hit 5.31 percent Monday, the highest since 2007 and closing in on that year's 5.44 percent peak. Here's the part that matters. Retail sales dropped 0.6 percent in July and producer prices came in flat, and both of those readings argue for lower yields.

Yields went up anyway. The Fed sets the funds rate, which has sat at 3.50 to 3.75 percent through five straight meetings, but nobody sets the 30-year except the people who have to buy it. Right now they want more to hold it, and that extra pay is called term premium.

The iShares 20+ Year Treasury Bond ETF (TLT) is off to a horrible start. Since I started buying TLT last year the coupons haven't kept up with the mark to market losses, which is the polite way of saying the price drop ate my interest. It traded near 81.66 Monday, the low end of its 52-week range, about 11 percent under the high while paying 4.36 percent.

That is not what I signed up for. My dividend portfolio is doing way better.

Congress is already gone, by the way. The House left in late July and comes back August 31. The Senate cleared out August 8 and doesn't return until September 14.

Both chambers passed funding bills on the way out the door and the two don't match, one running to December 4 and the other to December 11. Neither party wants to rock the boat before the midterms. Locking in current spending lets them go home and tell constituents their favorite word. Yes.

3 month TLT chart

Somebody Paid Up for Puts on a Flat Tape

Note below that the orange end of day put skew picked up a bid. Skew is just what traders will pay for out of the money puts relative to everything else, and it rose while the index went nowhere. Traders started reaching for that single digit vol in the front expiration even with the market sitting still.

That matters more than usual right now. VIX closed at 14.25 on Friday after touching its lowest print of 2026, with the S&P at a record and up about 16 percent on the year. Jonathan Krinsky at BTIG noted that in every midterm election year going back to 1990, the equal weight S&P has given back at least seven percent from its August peak into mid October.

A little put pop when things are this quiet is usually short term bearish SPX.

Today’s SPX Aug 19 Curve

Yields Up, Gold Up, Nobody Home

Wednesday at 2 p.m. Eastern we get minutes from the July 29 meeting, and that's the best read yet on how Fed Chair Kevin Warsh's committee is split. The vote was nine to three to hold, and all three dissenters wanted a hike, not a cut. Warsh delivers his first Jackson Hole keynote as chair on the 28th.

None of that touches what the long end is actually worried about. Gold is around $4,388 an ounce, up roughly 10 percent in a month, and crude is holding near $82 with the Strait of Hormuz still in the news. Commodities stay the risk off trade until somebody in Washington does something about supply, and nobody is there to do it for another two weeks.

NVIDIA Corporation (NVDA) reports the 26th and has Wall Street financing its chip ambitions, so that stock will likely hold up tech.

All of a sudden this week got a little nervy going into Wednesday.

Look for some Option Pit goodies on that soon.

And if you haven’t already, today is the last day to sign up for Licia’s Masterclass on how to trade one-day to expiration options like she does.

Not only is she teaching how it’s done, you get to see her use those new skills as she live trades the next day.

Tap this link to join before sign-up closes.

Hopefully this was helpful,

Andrew