USD Vol: Implieds fall post-CPI, but right side leads gains later

Implieds fall post-CPI, but right side leads gains later

The $23bn 30y auction tailed 1.5bps and the market reaction was muted in the immediate aftermath, but since then the back end has sold off a decent 6-8bps, led by the 7y point, lifting eyebrows. Sources speculate the selling could be driven by “a hedge fund with an agenda” amid illiquid markets, as it occurred right after the London close. The vol surface shunted lower with the passage of the CPI and the muted delivereds, but with the rise in the delivereds in the long end this afternoon, vols are pushing off the lows, led by the right.

For example, 10y10y traded down at 1582bps in the low for the day, sources note, but then last traded at 1595bps (possible versus 6m10y at 530bps). “It doesn’t take much, remarked one source, looking at the whippy price action in vols.

The ULC has underperformed and saw 3m gamma sink as much as 10 normals after CPI in the ULC, but is now down around 4 to 7 normals in 1y to 3y tails. Earlier, 6m2y traded at 140bps, 141bps (blended ticket, sources say). 2y1y traded at 145bps and 146bps, 3m1y traded versus 1y1y at 34bps and 108bps, respectively or a spread of 75bps and sources say the switch also traded at a spread of 74bps. 2y2y dealt at 281bps and down at 279.5bps and 6m3y traded at 207bps, according to sources and the SDR.

In longer tails, 6m10y traded at 522bps, 525bps and 526bps and down as lows as 521bps and then at 530bps (possibly versus the 10y10y at 1595bps) and then last outright at 528bps, 1m10y traded at 202bps and 201bps, while later on, a switch of 3m10y versus 3m30y traded at 366bps and 710bps, respectively. In longer expiries, 5y10y traded at 1366bps and last up at 1390bps, 4y10y traded at 1275bps, 3y10y dealt at 1175bps early on and 20y10y traded at 1815bps, also early in the session, according to the SDR.

For USD option trades on the SDR see here and for volumes please see here.  Note that the Total Derivatives SDR now shows broker/platform information for each trade, where available.

New structured notes

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

• Swedish Export Credit sold a $50m 3y NC6m fixed callable. The EMTN matures Aug 2026, is callable Feb 2024 and pays a 5.72% coupon. Lead is Daiwa and announced Aug 7.

   

• Natixis is working on a self-led fixed callable maturing Feb 2025 NC1 that pays 5.15%. EMTN.

   

• Credit Agricole is working on a self-led fixed callable maturing Sep 2024 NC1 that pays 5.1%. EMTN.

   

• UBS is working on a self-led $120m FRN callable maturing Aug 2025 NC1m that pays O/N SOFR +100bps. EMTN.  

   

• UBS is working on a self-led $500m fixed callable maturing Aug 2025 NC1 that pays 6.2%. EMTN.

   

• UBS is working on a self-led step-up callable maturing Aug 2025 NC1 that pays 5.38% to Aug 2024 and 5.39% thereafter. EMTN.

   

• Societe Generale is working on a self-led CMS linked note maturing Sep 2038 that pays 12% for the first year, then pays 12%*days CMS2y/30y is greater than zero and the US Evolution 30 Index above 60% of an initial index level throughout the life of the note. EMTN.  

   

• Standard Chartered is working on a self-led fixed callable maturing Feb 2024 NC1m that pays 9.39%. Credit linked. EMTN.