USD Vol: Surface jumps higher with double digit UST rally
Surface jumps higher with double digit UST rally
USTs have seen a double-digit rally as news of First Republic’s possible exploration a sale of $50-$100bn of long dated mortgages and other assets has further tanked its stock to -43% last. The vol surface is sharply higher with the renewed banking troubles.
3m expiries are anywhere from 5.5 to 16.5 normals higher on the day while 1y expiries are around 2.5 to 10 normals firmer on the day - both led by the upper left. For example, 1y1y is now around 178 annualized – well off the 148 annualized low in mid-April, but not as high as the 200 annualized level in mid-March.
Meanwhile a source noted that the options markets continue to be thin, and it appears that an after effect of the “unprecedented moves” in March is that the market liquidity remains “hampered” and people do not "carry inventory."
In addition, the trader pointed out that the extreme realized moves of March are “now part of risk measures” – and thus further curtailing risk buckets.
As for interbank trading activity, starting in the ULC, 6m1y traded at 102bps, 6m2y dealt at 192bps and 190bps and 194.5bps, 1y1y traded at 137.5bps and 136bps, 2y1y traded at 164bps, 2y2y traded at 312bps and 18m1y traded at 152.5bps, according to the SDR.
In longer tails, 1y10y dealt at 778.5bps, 779bps and 781bps, but is now showing mid of around 785bps on the screens while 3m10y traded at 402bps and is now mid on the screens at 411bps.
In vega points, 10y10y dealt this morning at 1630bps, 5y10y traded this afternoon at 1415bps, 7y20y traded at 2394bps, and 10y20y traded early on at 2526bps, according to the SDR.
Skew still receiver over for 6m expiries; 1y30y, 1y10y payers over
Skew has been more active from yesterday afternoon to today. For example, yesterday saw 1y10y 100bp each way go through at +28bps and +26.5bps and traded today at +28bps versus a 6m5y 100bp each way risk reversal at -4.5bps, sources say.
Yesterday afternoon 1y30y 100bp each way dealt at +32bps, the same level as was seen last Thursday, sources note. In the front end, 6m1y 100bp each way dealt yesterday late at -9bps and 2y2y100bp each way traded today at +13bps, according to the SDR.
For USD option trades on the SDR see here and for volumes please see here.
New structured notes
For a complete review of USD MTN activity over the past week, please see USD MTNs.
- Bank of America is working on a self-led $17m step-up callable maturing Apr 2038 NC3 that pays 5% to Apr 2026, 5.25% to Apr 2030, 6% to Apr 2034 and 6.5% thereafter. Domestic MTN.
- Merrill Lynch sold a $30m 10y NC4 fixed callable Formosa. The EMTN matures May 2033, is callable annually from May 2027 and pays a 5.20% coupon. Lead is Shanghai Commercial and announced April 24.
- Citigroup is working on a self-led fixed callable maturing May 2028 NC1 that pays 4.95%. EMTN.
- Citigroup is working on a self-led fixed callable maturing May 2025 NC1 that pays 4.8%. EMTN.
- Citigroup is working on a self-led fixed callable maturing Apr 2033 NC18m that pays 5.4%. Domestic MTN.
- Citigroup is working on a self-led fixed callable maturing Apr 2028 NC1 that pays 5.25%. Domestic MTN.
- Societe Generale is working on a self-led fixed callable maturing Jul 2028 NC1 that pays 5.22%. EMTN.
- HSBC is working on a self-led $50m fixed callable maturing May 2028 NC1 that pays 5.2%. Eurodollar.
- UBS is working on a self-led step-up callable maturing May 2024 NC6m that pays 4.92% to Nov 2023 and 4.92% thereafter. EMTN.
- Royal Bank of Canada is working on a self-led fixed callable maturing May 2024 NC9m that pays 5.3%. EMTN.
- Royal Bank of Canada is working on a self-led $15m fixed callable maturing Jul 2024 NC1 that pays 5.05%. EMTN.
- Ally Financial is working on a fixed callable via InspereX maturing May 2033 NC6m that pays 7%. Domestic MTN.
- Ally Financial is working on a fixed callable via InspereX maturing May 2026 NC6m that pays 6.55%. Domestic MTN.