Weekly Interest Rate Options Review (March 19-23)


* Volatility took a tumble, particularly after the FOMC, and finished lower for the week. Red mids are the weakest and are at seven week lows.

* Constant maturity volatilities (30/60/90 day) were lower across the ED strip this week:  modestly so in the fronts while mid curves are at multi week lows.

* Powell’s first go on the podium was met with very active, choppy trade and an unwind of flattener positions. The burgeoning trade war with China moved rates lower.

* Put skews (20 & 30 delta) were stronger this week throughout the ED strip. Activity was “put centric” with forceful structure build-up, ie  new positions.  Puts are over calls in EDK and 2EK.



* Volatility was lower for the week with the damage occurring after the hawkish FOMC. US is very near it’s low for 2018, TY and FV are near multi week lows.

* Constant maturity vols (30/60/90 day) were lower across the treasury strip and is at eight week lows across US, TY, and FV.

* Put skews (30 & 40 delta) were stronger this week and are over calls in US. TY  shows calls and puts at virtual parity while FV still has calls over puts.

* Once again, on weekly basis, treasury volatility continues to trade above ED in 0EH/TUH. However  2EH/FVH and 3EH/TYH shows the ED is slightly over its treasury counterpart.


Economic releases/Supply

Monday: Chi Fed Activity Index, $30 Bln 2-yr Auction

Tuesday: Consumer Confidence, $35 Bln 5-yr Note

Wednesday: Trade Balance, GDP, Pending Home Sales,

$29 Bln 7-yr Note

Thursday: Claims, PCE, Personal Income/Spending,

Chi PMI, Univ of Mich Sentiment

12:00 Pit Close

Friday: Good Friday (Closed)


by Dan Kehoe