Weekly Interest Rate Options Review (6/18 – 6/22)


* The USA vs the world trade war helped ED option vol, however gamma in the fronts was lower. Mid vols were slightly higher. Volumes continued to be below recent averages with EDM9 the exception. Friday flow: edm9 67 68 ps  paper paid  paid 3.75-3.65 (synthetically) for 100K

* Constant maturity volatilities (30/60/90 day) were lower again this week. Fronts continue to be the weakest and are now at the lowest level since early Feb.

* Volatility in the red mids was again the strongest on the ED strip this week and made new 10 week highs.

* Call skews (20 & 30 delta) are at their highest levels vs puts in over a year throughout the ED strip. The trade war gave calls a mid week boost while puts  continue to sag.



* Volatility was steady to slightly lower for the week as the tariff battles renewed. Volume was much like good BBQ, low and slow.

* The low vol trend may see a boost next week as the treasury will auction $100 Bln in notes (2/5/7) Tues-Thurs.

* Constant maturity vols (30/60/90 day) were lower across the treasury curve. The recent ranges have been tight and all measures are near multi month lows.    * Once again skews (30 & 40 delta) were little changed and show puts over calls in US and near parity in TY. Call are at a premium to puts in FV.

* ED vol was unchanged to its treasury counterpart this week and is over in 0EN/TUN, 2EQ/FVQ, and 3EU/TYU.


Econ Reports/Supply/Speakers

Monday:  Chicago FED Nat Activity Index,  New Home Sales

Tuesday: Consumer Confidence, $34 Bln 2yr Note

Wednesday: Durable Goods, Pending Homes Sales, $36 Bln 5yr Note

Thursday: Claims, GDP, (9:45CT) Bullard

Friday:  PCE, Personal Income/Spending, Chi PMI, U of Mich Sentiment


by Dan Kehoe