So we rolled,
H8 is now BAX1 and last we spoke what now is F1 was F2.
BoC didn’t raise rates in December waiting for the fed to move forward, the fed remained steady with a hike that was 98% priced into the meeting.
Since then we had an amazing jobs number, and today we read confidence across the headlines.
Results of the Winter 2017–18 S…[Read more]
I had a question about using ED’s as a proxy for trading the US yield curve and hope this is the right place for it.
I read an interesting blog which discussed potential steepner trades on the 2s10s and 5s30s as the yield curve continued to flatten. The trader was looking to hold this for some time as a macro play and another trader asked…[Read more]
I (re)heard a good trading quote the other day… “Ever wonder why fund managers can’t beat the S&P 500? ‘Cause they’re sheep — and the sheep get slaughtered.” The line is by Gordon Gekko, from the movie Wall S […]
I have a new article on Seeking Alpha on the return of the turn. This was written just this past weekend, on a theme I had been discussing in the CA for the past few weeks with clients.
Viewer Mail: Have noticed that open interest on both edz8 and edz9 are elevated in relation to rest of the curve. Appears has been that way since September. We dropped some after dec midcurve option expiration but still high. Either someone has large edz8/edz9 position. Or maybe related to the Turn??
Answer: Actually, the EDzs have had…[Read more]
When I mentioned the flattening, I was mostly referring to 2019 and beyond (as per the quote). 2018 is just going to converge faster to the BOC policy rates, so they will be more affected by the data and policy bias. Last week, the US, UK and Canadian long end all flattened noticeably. Those countries all happen to be higher yielding than say…[Read more]
Curve Advisor wrote a new post, Bungee Cord Drivers: Retirement and Inflation Part 1 1 month ago
I’ve talked a lot about the bungee cord in the past few months, that is holding the US longer end from taking off. But the bungee is more than just the ECB and BOJ QE. Implicit in the QE policies (aside from man […]
This week the flattening bias arrived but just in the back (H9 and beyond) while Z7/Z8 is now 60-61..
The flattening bias is going to be strong, with lower inflation the past few weeks in Japan, the EU and now China. I think as the curve continues to flatten, a subset of the market could take the flattening as a sign of an impending recession.…
BAX right now is hard to trade without a view, and I currently don’t have one. Nothing looks like a screaming buy or sell right now, without a view. The one interesting thing we saw the past two weeks on the US curve is large EDZ8-M8 calendar spread buying, only to have to go the other way last week. The flattening bias is going to be strong,…[Read more]
The US Federal Reserve is expected to raise their policy interest rate 25 basis points this week. The Fed will also increase the pace of its balance sheet reinvestment tapering, by increasing the unreinvested […]
Sorry. I had a brain cramp. I suppose a 1.4bp move could be large or small – it really depends on what happened the previous 24 hours. For example, if the Dec meeting increased 2bps the previous day, then a 1.4bp rise could be considered a decrease. This is because the 3mo libor rate is a spread function over the hike probabilities. Assuming…[Read more]
The Z7 bid yesterday and today isnt surprising. Remember that we sold off hard on the jobs number and CDOR only moved a 1.4bps(vs 5bps that Z7 moved).
How many points are you guys “pricing” inside CDOR at 1.434?
on the front end, i like the H8 3mFly at 5.5-6 as short candidate.
Z7/Z8 steepened 10bps since friday.
on a no hike…[Read more]
it is very interesting that we are flattening on selloffs, however i do wonder if its because of the long end hunt for yield. I totally agree with you that nothing trades on a vaccum jpy eur usd.
the open interest is minimal in the back.
BamBam: I have no strong view on when the BOC will hike. I was just saying that considering we are in a yield-grab environment in the long end, we should “consider” buying a fly around hikes in 2019 and beyond, rather than year spreads. Of course, it all depends on the level of the front spread you want to buy and the value of the spread you…[Read more]
Thanks for the insight.
Trading in Dec17 after CDOR fixing seems very strange to me, before fixing came it was trading at 98.51, and spot CDOR was 98.58 (100-1.42), no of days till expiry was 11. So, market was pricing .63 bps per day increase.
Then CDOR came 1.4 bps. So I was expecting it to sell off (i.e. 98.505 or less). But it went UP to…[Read more]
I dont know if the BoC will stop hiking after 3 hikes. One thing to keep in mind as that H9 and beyond, the open interest is smaller so it isn’t hard for spreads to move, one guy with a few to do can definitely move things around.
I think it is an interesting structure to pick your spots and roll, keeping in mind that the open interest in the…[Read more]
Thanks for the new posts and color on Canada. I’e been a little busy with the holidays and new projects, but I’ll try to reply in a timelier manner. I don’t follow Canada as closely, but if you want particular feedback on anything (shape of curve, charts (put labels), etc) let me know. I think Canada is a little difficult to trade right now,…[Read more]
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