• 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]

  • 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 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]

  • The “common sense” narrative is that the economic data has been good and we just got tax reform.  A $1.5trillion deficit means that much more debt that needs to be issued and a boost to the economy.  3.0% tens, […]

  • [WARNING: Idle Speculation Ahead]

    Last week, I mentioned what I suspected was potential spoofing in the ED markets.  Of course this was just a feeling.  I don’t have the tools to record and monitor the bid […]

  • Many of the things I wrote about EDs can be applied to BAs. I look at BAs weekly, but I prefer concentrating on countries where you can trade the STIR futures past 2-3 years. There aren’t as many relative value things you can do with only 2-3 years of futures, other than perhaps 3mo and 6 mo spread and fly structures. Also, when a central bank…[Read more]

  • I’ve been saying for weeks now why the curve was probably going to flatten.  I discussed how the other central bank policies could act like a bungee cord, holding the longer end US rates down.  Last week, we got […]

  • It was a quiet data week, but we had a very interesting news week, that had some interesting implications for the curve.

     It seemed for most of the year that everyone was expecting oil to go back down. […]

  • There seems to be two large flows going on right now in the front of the curve.  I had previously mentioned our EDZ8-Z9 friend, who appears to be on the wrong side of EDZ8-Z0 flattening.   But the other de […]

  • I’m getting the feeling that if we don’t break the downtrend line next week, it could be at least another month (until the next PCE and Employment report) before we test it again.  We have a TON of data and news […]

  • Now that the ten year yield is back near the recent highs, I’m a little uncertain as to how far this goes.  If it wasn’t for the downtrend that everyone seems to be looking at, I would probably say we could sell […]

  • Last week I said for the bullish scenario that Z8Z0 could get to the low (28.5) and we may be able to rally 10bps.  Well, that’s what happened.  We had several pieces of bullish news: (1) the lower CPI on Fri […]

  • I haven’t looked at the inflation breakdown in a while, so I thought I would dust off my old economics degree and take a look.  I’m really no economist.  But as Richard Thaler showed, the most important thing […]

  • Now that we have Data Week over with, the rest of the month should have less noise than average.  However we have the following considerations for the rest of the month:

    North Korea. As mentioned previously, […]

  • I was listening to Bill Gross on Friday and he mentioned that we will be hitting the 30 year downtrend line in ten year Treasuries between 2.4 and 2.45% (currently 2.37%).  Gundlach made fun of Gross’s li […]

  • From time to time, I’ll post an occasional trade.  You’ll need a reasonable cost structure to take advantage of this opportunity.

    On Friday I sent out the following trade:

    I saw EDZ7 98.625 call trade 1.5 […]

  • I mentioned in client emails that I prefer taking Fed hiking views in FFs, and I wanted to explain a little more fully.  One of the things I have been doing more work on this year is looking at opportunities on […]

  • For the rest of this month, I’ll reprint the Trade Thoughts section of the CA Newsletter.  There are seven parts to the Newsletter: (1) My take on the events of the previous week, (2) A summary of where I s […]

  • I know the markets have been ignoring the Fed’s dots for some time now.  But as I always say, as the meetings get nearer, the Fed dots get more accurate.  For example, the day before a meeting, if you were to do […]

  • Since the macro rates picture has been hard to decipher, I think this is a good time to look at the micro.  There are a lot of interesting things going on in the very short end of the curve right now:

    I. An […]

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