If it looks like a duck and it quacks like a duck… well, it doesn’t really matter what the Fed says – it’s probably gonna trade darn like a duck, too.
From repos to POMOs & from LSAPs to QE, here’s what every trader needs to know.
Category: FX
The Great LIBOR Liquidation
The fate of LIBOR is likely to precipitate one of the largest one-off structural changes to the interest rates market in our lifetimes. Regulators are growing increasingly concerned because we’re ill-prepared for what comes next. Thus, more ad lib experimentation by policymakers.
It’s a tectonic shift in a $400 trillion+ market.
5 Things Every Trader Must Know About the Rates Market Move
Two weeks ago, I wrote that the front-end of the interest rates curve was in serious trouble – given that policymakers were keenly aware of their deficiency in handling any selloff; more so than any point I could recall in my two+ decades of Treasury trading.Today, we’ve just witnessed what qualifies as easily the largest 2wk move in the front-end of the Treasury market in 10+ years. So what happened, exactly?
A “Bazooka” Ain’t What It Once Was
Perhaps you’re wondering, having read breathless press accounts of what to expect from today’s ECB, what a “bazooka” buys you these days in Europe?
Well, Turns Out… A “Bazooka” Ain’t All That It Used to Be.
The Nightmare Scenario… “Unsafe” Havens
Thanks to policy-induced crowding-in of Treasuries, the front-end of the curve is now doing exactly what the Fed feared the most. A nightmare scenario of cutting rates… and nobody caring. Positive historical skew has made them a popular diversifying asset for the momentum crowd – and that’s exactly why we should be concerned.
Duration is No Longer “Trending”
You want some duration? Try this on…
The CTA community has likely sold in excess of $100bn 10-yr Treasury equivalents in the last 5 days – and that number is only going to grow.