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US TSY FUTURES

BLOCK, 10Y

CABLE
CABLE: ###POV: MARKET SEES BREXIT NEWS AS NO GAME CHANGER FOR GBP
-GBP/USD 1w implied vols have only exceeded today's levels on six occasions so
far this year, all of which were during the US equity turmoil in early February
and were quickly retraced once stock markets settled, suggesting that markets
have certainly taken into account the increasingly politically negative Brexit
headlines.
-Below the surface however, options markets have taken a more nuanced approach:
while the GBP/USD risk reversals curve has adjusted lower (particularly in the
short-end) over the past week, it still sits considerably higher across the
curve than mid-October's levels.
-This is echoed in the GBP/USD SMILE curve: while OTM puts have been well bid
over the past week, the curve has remained broadly balanced, signalling that
options buyers aren't taking a uniform position of extended GBP/USD downside.
-Hedging against GBP/USD downside remains historically expensive for mid-range
contracts: a GBP/USD 3m vanilla put with 1.27 strike costs 118 GBP pips, but
adding a 1.22 KO barrier trims the premium to just 17 GBP pips.