Thread by @pauleluard

So we had a crazy week. 5y yields had a one day move equivalent to a 3m straddle breakeven. It’s violent out there.
And whats worrying me is not that. The gamma model saw the craziness unfold but whats really bad is deeper.
1/x

First one is the failed 7y auction. There are nasty precedents. Guess when.
2/x

Yeah and now we have the us pricing of hikes lagging versus the rest of the world and that usually doesnt last very long.
3/x

Now when did we have a pricing that started to go a bit weird and back end flattening as a result? You guessed right. And it was a French guy who wrecked havoc.
I know many a stir trader who have a special place in their hear for Trichet.
4/x

And what’s very interesting is that the Real Money have unwound their new back end shorts at lightning speed.
5/x

Vol wise it’s been a fest a bit everywhere though credit vols havent really joined the party.
Even $TSLA vols have been sort of behaved.
6/x

On the VIX front it’s a really odd one. VIX ETNs selling, lower VIX 1m and skew higher while spot VIX rises and back end rises. Hum. Unusual. But not a bit signal. Even spx sell-off is in the expected range.
7/x

Now what has really moved is vol on rates fwd. there’s pain. And then there’s fixed income pain. And then there’s stir trader tears.
8/x

Last one. The gamma model is a bit inconclusive here. Just says things are in places with the largest expected moves (and also the highest concentration of zero moves).
But usdjpy is saying it will stop and reverse at 107.30. Which all else equal means usd 1y1y circa 36bp.