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CHINA RATES

China Repo Rates Diverge on Tuesday

US TSYS

Belly Leads the Bid

CNH

CNY Fixing - Close To Neutral

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US TSYS
Concerted tone change as underlying rate futures traded weaker again -- but off lows by the close. Surge in upside calls, outright and on spd as active accounts likely positioned for a less aggress hawkish tone from the Fed after they (most likely) hike next week on the 16th. Underlying theme: Russia war in Ukraine increasing uncertainty in markets, Fed less apt to prove current market pricing of 5-6 25bps hikes by year end.
  • Some highlight trades included:
  • +20,000 Jun 98.62 call over risk reversals, .25 vs. 98.625/100%
  • Block, +25,000 short Jul 98.25 calls, 8.0 vs. 97.59/0.20%
  • +12,000 May 98.62/98.75/98.93 broken call flys, 0.0
  • Overnight: 30,000 Red Mar'23 98.75/99.50 call spds vs. 15,000 Red Mar'23 96.75 puts, 0.0 net/calls over.
  • Note on puts, while there were a handful of long put unwinds, active accounts continue to maintain large downside put positions -- insurance for a wide array of hike scenarios through 2023.

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