Punishing the Herd

Friday’s position shift across the front-end of the interest rates curve was the single largest swing in the last 6 months by a multiple of 2.5x, bearing tell-tale signs of new shorts. As the prospect of a trade truce drove giddy selling at the lows – with most of the volume going thru prior to the Fed’s midday announcement – there was ample room for a counter-trend move, a staple of the 2019 trading diet. The subsequent reaction in the afternoon & again this morning (the latter being triggered by the inevitable negative trade headline we all have come to expect as the new normal) is nothing more than a brutal punishment of that behavioral bias most innate in all of us.

Life After LIBOR: Eurodollar Edition

So you’ve heard that LIBOR is going away, due to be replaced by SOFR? Well, if you’re not a regular user of interest rate swaps & swaptions (which, unless you’re an institutional-level client, is probably true), then what you really care about is how this impacts the thing you can most readily trade: Eurodollar futures. Here’s how Eurodollars are going to work after LIBOR.

1 2