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The premium that traders pay to hedge the risk of a sell off in TY futures has pulled back from the recent extremes, with puts moving away from richest levels vs. equivalent calls (a reminder that TY futures have moved away from the lowest levels observed since ’09 in recent sessions).
- This is depicted in the TY skew measure (using 1-month 25-delta calls and puts).
- This move comes at a time when stagflation/recession fears have become more embedded, with various members of the FOMC (including Chair Powell) sounding a little more cautious on that matter, while market pricing surrounding Fed pricing edging away from the recent hawkish extremes.
- Note that the TY skew measure failed to breach its Mar ’21, multi-year lows during the latest foray lower.
Fig. 1: TY Skew
Source: MNI - Market News/Bloomberg
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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