USD Vol: Vols rise from yesterday’s depths

Chart numbers 14 Jun 2022
The double digit UST selloff spurred some vol buying in pieces like 1y1y, 3m10y and 2y10y, but the move did not goes as far as some thought it might.

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  • Vols rise from yesterday’s depths

  • New structured notes


    Vols rise from yesterday’s depths

    Treasuries have been smacked down to the tune of 5 to 16bps, with the belly leading the carnage. Some sources suggest that the BoJ defending of the JPY today likely came with significant sales of USTs and is a plausible culprit for the UST selloff.  


    The vol surface saw some buying and depending where one’s vols were marked yesterday, vols are either lower (3pm close), or higher on the day (5pm marks), sources say. On one of the broker screens, vols in 3m expiries are higher by 4-6 normals today, while 1y expiries are around 2-4 normals higher while in longer expiries vols are up 0.5 to 1.5 normals.


    “I thought vols would get lifted even more today,” remarked one trader, and noted that 1y1y traded up to 114bps but not past that today. With the recent realizeds, 1y1y could be around “118-120bps,” he judged.  


    That said, 1y1y did catch a bid today, with trading at 112.5bps, 113bps, 113.5bps and last at 114bps, with $500m trading when the buyer wanted a yard. It is 114bps bid on the follow, sources say.


    In other activity, 3m10y dealt at 429bps, 432bps, 434bps and 435bps; 1y10y traded at 806bps, 810bps and is now marked around 815bps mid. 2y10y dealt at 1092bps, 1095bps and then 1100bps. For more, please see SDR trades. In FV options trades saw a large FV call put buy this morning of 8K with a strike of 108. 


    Overall, today’s double digit realized move has amply justified the level of vol breakevens, one source pointed out, but the source still judged that “vols are still pretty high.”  


    Meanwhile, on the supply side, though rates are higher and IRRs for zero-coupon callables are higher all other things equal, a source highlighted that the “strength of the dollar” as the major deterrent for investing in USD denominated callables.



    New structured notes

    For a complete review of USD MTN activity over the past week, please see USD MTNs.


    • Credit Agricole is working on a self-led $15m fixed callable maturing Sep 2037 NC1 that pays 5.95%. EMTN.


    • ING Bank is working on a $28m fixed callable maturing Sep 2027 NC2 that pays 5.51%. Lead N/A.  EMTN.


    • Goldman Sachs is working on a self-led step-up callable maturing Sep 2032 NC2 that pays 5.25% to Sep 2026, 6% to Sep 2029, 7% to Sep 2031 and 8% thereafter. Domestic MTN.


    • JP Morgan is working on a self-led fixed callable maturing Sep 2024 NC1 that pays 4.5%. Domestic MTN.


    • UBS is working on a self-led step-up callable maturing Oct 2024 NC1 that pays 3.79% to Oct 2023 and 3.99% thereafter. EMTN.


    • Royal Bank of Canada is working on a self-led $11m fixed callable maturing Sep 2023 NC9m that pays 4.37%. EMTN.   


    • Standard Chartered is working on a self-led fixed callable maturing Oct 2024 NC1 that pays 4.6%. EMTN.