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So far Curve Advisor has created 238 blog entries.

Q2 Preview

April 1st, 2018|Economy|

We could see extremely interesting price action this quarter.  There are a number of catalysts we had been anticipating in Q2.  Let’s look for opportunities in the next week or two in the following areas: Equities.  We had been looking forward to this next set of earnings for months now.  We should see the effects of the lower corporate tax rate and investment incentives.  We will also get the announcements on what will happen with the repatriated earnings.  I would think one of the reasons people have liked buying equities on dips is because of the anticipation of these pieces [...]

The Fed’s Overshoot

March 25th, 2018|FOMC|

One of my former colleagues at JPM was a rocket scientist – literally.  We once discussed how for some corrective system models, you can have a situation where you overshoot before eventually settling to the equilibrium.  That conversation was what I thought about when I saw the Fed’s dots last week. The way the Fed models tend to work is that there is a bit of an overshoot on rates, because Fed policy generally takes a number of months to take effect.  So if the Fed had the foresight of a bat, they would keep hiking as they saw inflation [...]

Fed Meeting Thoughts

March 18th, 2018|FOMC|

There are so many wacky things going on with Eurodollar futures, from libor blowing out to Kong buying EDZ8-Z9 in unprecedented sizes, that it’s hard to get a good handle on what is going on with short end interest rates just from looking at the EDs.  I haven’t seen the ED curve this messed up since the Libor crisis a decade ago.  But this time around, the economy is perfectly fine!  EDs are insane!!! Fortunately, we have Fed Funds, which gives us a cleaner look.  But even that has a little noise in it from the markets pricing in a [...]

Normalization Timing

March 11th, 2018|Positioning|

The two big stories this year are: (1) Libor increasing and (2) Kong buying EDZ8-Z9.  These two factors have had a negative impact on the back of the whites.  Kong has also had a negative impact on the steepness of the curve past EDZ9.  Kong has had an indirect effect on the curve past EDZ0, since there appears to also be some chunky EDZ9-Z0 buying from time to time, in response to Kong’s EDZ8-Z9 buying.  The question is, when do these two factors turn? There’s some probability the correction could happen at any day.  We have had some false normalization [...]

White (Pack) Normalization

March 4th, 2018|Positioning|

How things can change in a week!  A number of the things I mentioned last week are starting to normalize.  Apparently, I don’t live in Bizzaro World after all! The libor fixing stabilized. It’s only been a few days, but libor looks to be stable around here.  As per the chart I showed last week in the Trade Thoughts section, I do think we could get more EDM-FF narrowing as the year goes on, than is currently priced by EDM8-FF.  This makes owning EDM8-based call structures attractive, as both a libor play and a crisis play.  The other thing we [...]

White (Pack) Noise

February 25th, 2018|Positioning|

There are a bunch of strange things going on in the front of the curve (next 12 months).  It’s been a really long time since I’ve seen so many unusual cross-currents go through at the same time: The libor fixing is going nuts. EDH8 vs FF has widened about 21bps since January 23.  Part of that is just us breaking the multi-decade tens downtrend line – you would expect some widening of ED-FF spreads on a selloff.  And part of this is EDH8-FF going from being about 5bps narrower than libor-FF to 6bps wider than libor-FF.  The popular narrative is [...]

Trading Around a Monster

February 18th, 2018|Positioning|

It has been many years since I’ve seen flows this aggressive and wacky on the US rates curve.  It appears King Kong (the EDZ8-Z9 buyer) likes to try and pound square pegs into round holes.  The curve has wanted to flatten, but he insists on keeping EDZ8Z9 steep.  I thought he was done after the stock market correction, as the OI in EDZ9 declined noticeably.  But he came back even stronger.  This was very unexpected, since seeing how the greens led a crisis rally (thanks to him keeping the curve steep) should have made him realize that EDZ8Z9 was going [...]

Equity Regime Change?

February 11th, 2018|Economy|

I’m not one of those people constantly calling for an equity correction.  Last year, when everyone was on the “October crash” bandwagon, I said while this was possible, that seemed liked a crowded trade and that the positive EV (expected value) was probably to the upside.  Most “analysts” will just look at something simple like a P/E ratio and not consider the other things going around them… like the corporate tax reductions, individual tax reductions, repatriation, a new infrastructure spending plan, the popularity of short vol strategies, and global central bank QE.  If you weigh all of the above, it [...]

King Kong Lives

February 4th, 2018|Economy|

Long time readers will know this story, but when I went through the (JPM) Chase two-week trading simulation, I just crushed it.  I had been playing strategy games and video games all my life.  So making markets and buying and selling many trades in fast markets was relatively simple.  One trading unit was in foreign exchange.  I had no experience with FX whatsoever.  But I had no reason to think I couldn’t do as well in this simulation, as I had in the past simulations.  When I sat down, the default trade size was set to “1”, which seemed very [...]

A Caveman’s View of Bitcoin

January 28th, 2018|Economy, Featured|

I’m not claiming to be any kind of Bitcoin expert.  I don’t know much… after all, I’ve been trapped in a block of ice all these years[1].  In particular, I have no idea how Bitcoin (or equivalent) can be considered a “currency.” When you have a fixed asset where someone keeps taking a fractional transaction cost, eventually, the users end up with next to nothing and the processors end up with most of the asset. A long time ago, my father and I were sitting around the fire cooking our mammoth meat, and I described to him how poker at [...]