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Bond rally nearing an end?
- Thread starter gharghur2
- Start date
Quote from JohnL111:
Are we only seeing one side of the trade? Are the straddle 'sellers' in treasuries, straddle 'buyers' in spread products? If you got a spread blow-out that was just 1/10th of the Fall 1998 move, you would make good money on the vol arbitrage. Are vols too cheap in ED?
It's that simple? We have no way to know the ratios or tenors on any replication. You have no way to know that they'd make "good money on the vol-arbitrage"
Yes, this low volatility is out of control, but nothing short of a disaster or structural change in long end interest rates is going to change it. Essentially, at this point, it is my belief that say one day the 30yr straddle will close at 1-30 (or any given unusually low number for front month 30yr vol) and open at 3-00 the next day. Until then they will continue to come in every day and absolutely smoke this stuff. Option locals were finally able to capitalize on a slight bid in the May 107 straddle the past two days, it traded up to 1-26 and 1-27, option locals sold about 15,000 total at those levels, and then bought them from the Goldman guys late yesterday down to 1-21, unbelievable trade.
I'm sure by now you've seen Lehman's call for a 5.50% discount rate....Quote from ralph00:
Euro$ futures are now starting to discount a 5.25% Fed Funds rate. At this point, they are only saying its a small chance, but it is out there.
Pretty wierd. I haven't heard anyboy out there talking about 3 more tightenings by the Fed. Curve shorteners may find themselves on the wrong side of some serious volaitility if the economy weakens. Euro$'s could move up 50 pts in a heartbeat.
Yeah, I saw that over the weekend.
Its funny how markets work. Since early January, long-dated eurodollar futures have gone from pricing in a Fed Funds stoppage at 4.50% to beginning to price in a stoppage at 5.25% - and NOW Lehman makes their call. Where was Lehman 50 basis points ago? It really never fails.
I've been itching to go long eurodollars, but have thankfully kept my powder dry, ... until now maybe. The Lehman call may be ringing a bell - I suspect we are pretty close to a bottom.
Anybody with their eyes open can see that real estate markets are imploding. I find it hard to believe the Fed is not aware of it, and that they are a lot more concerned then they are letting on.
The June 07 eurodollars closed at 94.95 on Friday. I expect I'll be scaling into a nice long position over the next few weeks.
Anyways, this is a bond thread. Sorry to hijack. Perhaps we should start a Fed watch thread!
Its funny how markets work. Since early January, long-dated eurodollar futures have gone from pricing in a Fed Funds stoppage at 4.50% to beginning to price in a stoppage at 5.25% - and NOW Lehman makes their call. Where was Lehman 50 basis points ago? It really never fails.
I've been itching to go long eurodollars, but have thankfully kept my powder dry, ... until now maybe. The Lehman call may be ringing a bell - I suspect we are pretty close to a bottom.
Anybody with their eyes open can see that real estate markets are imploding. I find it hard to believe the Fed is not aware of it, and that they are a lot more concerned then they are letting on.
The June 07 eurodollars closed at 94.95 on Friday. I expect I'll be scaling into a nice long position over the next few weeks.
Anyways, this is a bond thread. Sorry to hijack. Perhaps we should start a Fed watch thread!
Welcome aboard Ralph!
Any semi-intelligent comments regarding the interest rate complex are welcome here. I just snuck in through the freight entrance.
Is there any way to plot/extrapolate the YIELD of the "New 30 Year" on TS8.1 back in time? That gap in the yield chart when they reissued the 30 last month is really PISSING me off.
I am trying to figure out 30 YEAR support based on past Yield trends.
Any semi-intelligent comments regarding the interest rate complex are welcome here. I just snuck in through the freight entrance.
Is there any way to plot/extrapolate the YIELD of the "New 30 Year" on TS8.1 back in time? That gap in the yield chart when they reissued the 30 last month is really PISSING me off.
I am trying to figure out 30 YEAR support based on past Yield trends.
Quote from Surdo:
Welcome aboard Ralph!
Any semi-intelligent comments regarding the interest rate complex are welcome here. I just snuck in through the freight entrance.
Is there any way to plot/extrapolate the YIELD of the "New 30 Year" on TS8.1 back in time? That gap in the yield chart when they reissued the 30 last month is really PISSING me off.
I am trying to figure out 30 YEAR support based on past Yield trends.
I thought I was the only one!!! Ya, thankfully the Bloomy has the underlying at:
GT30 <gov> gp
Quote from JohnL111:
Are we only seeing one side of the trade? Are the straddle 'sellers' in treasuries, straddle 'buyers' in spread products? If you got a spread blow-out that was just 1/10th of the Fall 1998 move, you would make good money on the vol arbitrage. Are vols too cheap in ED?
Quote from riskarb:
It's that simple? We have no way to know the ratios or tenors on any replication. You have no way to know that they'd make "good money on the vol-arbitrage"
OK, so my vol arbitrage theory is somewhat fanciful. Do you think the trades are an outright bet on lower vols or some kind of manuever to hedge a options book?