Options - USD
Vols rose, somewhat tepidly, considering the delivered vol post-FOMC. ULC traded along with 2y10y. Earlier, a 5x7 wedge and a 30y accreter dealt.
Intermediate vols in 10y tails from 1y10y to 5y10y saw selling this afternoon as a light bid this morning was sold, on possible clean up activity.
Vols are starting the week higher, with 3m expiries up as much as 1.5 normals. 10y tails see interbank activity. BofA looks to buy 1y10y on a dip
Gamma is lower in part due to the passage of the CPI event, but also due to low realizeds, sources say. The ULC continued to underperform.
For the second day in a row, gamma on longer tails has firmed despite the underlying rally. Sources suggest stop outs of short vol positions perhaps.
Gamma on longer tails have led a small bounce today as recent cheapening in vols has stabilized, sources judge. 3y2y 100bp high payers trade.
The rally post NFP has hit gamma and the ULC hard, with the rest of the surface following. ZCs popped up and may help to explain recent vega softness
The ULC and belly tails in gamma are higher ahead of NFP, and sources find the market jittery ahead of the event. Vega switches were active.
The vol surface is lower as realized volatility is low, and rates have not moved. Sources see risk/reward slanting toward higher rates/higher vol.
The vol surface is lower, with exception of 1m expiries that are only higher optically. The lower left has led the softening with 4y2y hit down.