Yes I do because if you have money and are able to invest it will be really easy to make money in an inflationary enviroment. Just buy anything hard short anything thats paper.
Bond rally nearing an end?
- Thread starter gharghur2
- Start date
There isn't any skew in the Sep series. Buying the Sep atm implies a play on vega/skew; the atm has the highest initial vega, so he my be manufacturing a synthetic long straddle with futures with the atm put. Suppose there was a skew; a play on vol-edge requires a gamma[option sale] or delta[long futures] hedge. It's more direction than vol w/o the hedge. He looks to be playing the cheap IVs in Sep expecting the yield curve-steepening trade to increase vol across tenors.
These guys often trade synthetics to avoid showing their hand by trading in the natural combo. Size is deceptive; for example, the synth straddle traded 100,000 puts x 50,000 futures is a 50k lot natural straddle. It's easier to trade out deltas in the overnight session when futures are liquid and options aren't traded in any size.
And with an ever growing inflation premium. The 30 yr price decrease is three times the 10 yr price decrease this morning.
San Fran Fed president Janet Yellen who made a speech yesterday, seem to think that the curve has steepened because of global growth using up the "conundrum's" saving glut.
I think we may have the most dovish FOMC ever! Greenspan had some 50bp cuts in rates during the move to 1%. Yet the increase to 5% has been in steady 25bp increments, and well advertised to the markets. I don't think that this FOMC can turn into hawks - they will always spin the economic situation into a Goldilocks scenario. The markets have not been drinking from a punch bowl, but a keg. If you take it away, the detox is too brutal
I saw in the minutes where Bernanke wants to extend all FOMC meetings to 2 days. Why? So they can spend more time writing the press release. Unbelievable!!! During the Volker days (a real hawkish Fed) it would sometimes take the markets a month to figure out if the Fed had made a move.
If the economic situation deteriorates, the Fed will be a complete basket case. They will over-stimulate and risk inflation.
Hi John,
Not certain that I agree.
It appears that BB wants two days to cover all scenarios.
Also, I believe the objective of the FED, at this point, is to actually slow down the economy, so that the inflationary pressures will ease somewhat. Then, standby and let the economy recover on its own. They repeatedly refer to capacity utilization and employment as being historically higher than acceptable levels under the current environment.
Not certain that I agree.
It appears that BB wants two days to cover all scenarios.
Also, I believe the objective of the FED, at this point, is to actually slow down the economy, so that the inflationary pressures will ease somewhat. Then, standby and let the economy recover on its own. They repeatedly refer to capacity utilization and employment as being historically higher than acceptable levels under the current environment.