USD Vol: 5y 0% floors trade up; CFS; 6m10y risk reversals

5y 0% floors trade up; CFS; 6m10y risk reversals

Treasuries have bear flattened ahead of Powell’s Jackson Hole speech tomorrow morning. Swap rates are last 2.5bps to 3.5bps higher on the day. Earlier, the $8bn 30y TIPS auction tailed around 2bps, but saw a record low dealer allocation of 4.3%. The vol surface is seeing a small tick up in gamma points with 3m expiries around 0.3 to 1.3 normals higher. Further out, vega points are lower on the day by around 0.5 normal– principally due to a 7y10y trade at 1555bps, which caused vega points to be marked down as a result, sources say.

As for gamma, ULC has seen a variety of trades go through. In CFS, a source pointed out that 5y 0% floors saw a “big lift” at 28.5bps which was likely off the back of “some deal flow” the trader suggested. Afterwards, when rates were higher, the 5y 0% floor traded at 27.25bps, sources note, with some of the change in the level due to the delta. The level of 5y 0% floor “has gone up” versus last week, remarked one source, as the level was around 24/25bps the week previous.  

Elsewhere, 1x2 CFS traded at 136bps and 2x3 CFS was last 161.5/162.5bps, sources say. In swaptions, 2y1y traded down at 153bps and was offered on the follow at 151/153bps. In switches, 6m1y versus 1y2y traded in size of over a yard at 67.5bps and 218bps, respectively. A fly traded of 6m1y/9m1y/1y1y traded at 67.5bps, 92bps and 113bps, respectively. 1y1y versus 1y2y traded as a switch at 113bps and 218bps, respectively, according to the SDR.

In longer tails, a fly of 6m5y/1y5y/2y5y traded at 334bps, 472.5bps and 640bps, respectively, 1m10y traded outright at 227bps, 3m10y dealt at 387bps,  2y10y versus 1y10y traded at 1046bps and 765bps, respectively.  

In skew, a 6m10y 50bps each way risk reversal traded at +18bps, according to sources.

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.  

• Citigroup is working on a self-led fixed callable maturing Aug 2033 NC3 that pays 6%. Domestic MTN.

   

• Citigroup is working on a self-led fixed callable maturing Aug 2038 NC1 that pays 5.85%. Domestic MTN.

   

• Citigroup is working on a self-led fixed callable maturing Aug 2025 NC1 that pays 5.7%. EMTN.

   

• Citigroup is working on a self-led $25m fixed callable maturing Sep 2024 NC1 that pays 5.8%. Domestic MTN.

   

• Bank of America is working on a self-led fixed callable maturing Aug 2038 NC2 that pays 6.05%. Domestic MTN.

   

• BNP Paribas is working on a self-led fixed callable maturing Jul 2030 NC3 that pays 7.6%. EMTN. Credit linked.

   

• JP Morgan is working on a self-led fixed callable maturing Sep 2027 NC1 that pays 5.775%. Domestic MTN.  

   

• JP Morgan is working on a self-led fixed callable maturing Sep 2025 NC1 that pays 5.7%. Domestic MTN.  

   

• UBS is working on a self-led SOFR ranger maturing Sep 2025 NC1 that pays7.65%*days SOFR is 0-5.6%. EMTN.

   

• UBS is working on a self-led fixed callable maturing Sep 2025 NC1 that pays 5.75%. EMTN.

   

• Toronto Dominion is working on a self-led $50m floating callable maturing Aug 2024 NC9m that pay O/N SOFR +61bps.  CD format. Domestic.

   

• Societe Generale is working on a self-led $10m fixed callable maturing Jul 2028 NC1 that pays 7.2%. EMTN. Credit linked.