The position was established on 28 August, where we recommended selling 6M5Y payers ATM forward (strike 2.10%, spot ref: 1.75%) and buying 6M2Y payers ATM forward (strike 0.85%, spot ref: 0.55%) in a delta neutral ratio. A premium of 58 ticks was received.
We liquidate the package for a price of 29 ticks (including trading costs) and book a profit of 29 ticks (measured in 5Y risk equivalents).
Following the strong performance in US fixed income markets following the September Fed meeting and the following period of political uncertainty, we now believe the risk-reward for being positioned for lower US rates has worsened.
Further, we have two other recommendations open that also benefit from lower US rates, so we find it prudent to lock in some gains.
Remaining open trades
Short belly in euro fly Jun14/15/16. The position gained 4.5bp and we keep it open.
The final recommendation we have is to receive 5Y5Y USD swaps versus paying in EUR. The position was opened on 19 July at 138bp. Currently, the level is around 103bp. We lower the stop into the profit zone to secure profits in any scenario. The updated stop is at 123bp.
To Read the Entire Report Please Click on the pdf File Below.
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Risk Reward Positioned For Lower US Dollar Rates
Published 10/20/2013, 05:20 AM
Updated 05/14/2017, 06:45 AM
Risk Reward Positioned For Lower US Dollar Rates
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Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
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