5s10s swap meet

Zero Hedge - 5s10s

The 5s10s curve historically has more variance than 7s10s, however both .. and reforming the pension system could meet resistance from the Northern League. is evident from extremely tight levels of swap and OIS/Treasury spreads. Yield curve - the curve made by plotting swap tenors against rates. In curve trades, buyer puts on the steepener, so "50 offer 14 and a half 5ss rate cases one may happen to meet a company that really pays up to 2%. 5s/10s Treasury curve averaged around the last Fed .. Spreads included are as follows: matched-maturity swap spread of 5-year on-the-run.

Also, consistent with their growth outlook, they see core inflation continuing to rise with headline CPI forecasted to be 3. Over the next several weeks, event risks will come to pass and we expect clarity from the end of QE2, the debt ceiling and Dodd-Frank. We believe that this will reduce uncertainty and the safe-haven bid for bonds. Our macro team believes that the recent soft patch is nothing more than a mid-cycle slowdown and that risky assets may perform starting in 2H11 see Global Debates Playbook, June 16, To be sure, our shift toward short from neutral duration has nothing to do with the end of QE2 and related concerns that there will be a lack of demand to buy US Treasuries once the Fed stops buying them.

5s10s swap meet

Also, we think that an agreement will be made on the debt-ceiling debate between the Democrats and Republicans some time in July before the August 2 social security payment deadline. And as for Dodd-Frank, which is scheduled to start imposing new regulations on the market as early as July 16, we believe that much of it may be postponed until later this year and possibly into due to the lack of clarity around many of the intended regulations.

As the market is priced for slower growth over the past several weeks, we have seen inflows into bond funds rise sharply while risky assets saw outflows see Exhibit 2. Also, according to surveys we follow, the decline in rates has caused many to reduce their short positions.

2s10s- A Lousy State | y3y3games.info

Thus the combination of money flows and duration surveys we track indicate that the short bond exposure in the market has been reduced which technically puts less pressure on rates to stay low and instead clears a path for them to rise. Duration risk cuts both ways. When growth expectations for were being downgraded, longer-duration bonds performed best. This was most notable in TIPS as real yields significantly dropped.

The drop in real yields was so dramatic that the year-to-date performance of TIPS even exceeds that of high yield. Long-duration exposure presents a greater risk and may become a source for underperformance rather than outperformance going forward, especially if 2H11 growth rebounds as market consensus suggests it might.

5s10s swap meet

Our tactical shift from neutral to short duration has several implications: And the best way to express a bearish stance in the rates complex according to Caron: Since April, the belly of the curve has richened significantly as rates have marched lower Exhibit 1. We continue to recommend being short the belly vs.

In line with the butterfly, and in order to express a more robust short duration position, we recommend a curve flattener on the UST 7s10s curve: We argue that growth expectations have not been downgraded to the extent that rates in the y sector have fallen with survey consensus at 3. This past week, price action in the market has reflected uncertainty as, for example, the 7y point increased 12bp on Tuesday only to decrease by 14bp on Wednesday returning to similar levels.

We expect the market to remain range-bound in the near term; however, we see fair value of the 10y note at about 3. With the 10y dipping to the low 2. UST 7s10s Flattener As we have shifted from neutral duration to tactically short, we seek relative value trades that would perform if yields in the belly increased.

We believe a UST 7s10s flattener is one of the best trades that fit this description for the following three reasons: This is the rate banks charge each other for inter-bank deposits in London. This is used as a benchmark floating rate for a lot of stuff.

Permutations include "Euribor," which is the Euro interbank offer rate.

Zero Hedge - 5s10s

Eurodollars - Dollar denominated deposits at banks not regulated by the Fed so outside the US. The eurodollar rate is the interest rate on these deposits.

The eurodollar rate is important as it signifies the dollar interest rate free of Fed regulation. Don't confuse Eurodollar with anything having to do with Europe. It doesn't have that much to do with Europe. Permutations include "Euroyen," which is the deposit rate for yen denominated stuff outside Japan.

Get on the Desk: Getting by on Wall Street: Learn the Lingo (Rates)

Eurodollar Futures - These are important enough that I figured they deserve their own post. These are futures on the Eurodollar rate. They are priced as Rate. So if the Eurodollar rate is 5.

Of course, futures for future dates include a good bit of speculation. These are a fairly good proxy for the risk-free rate expected starting a given date as libor is a good proxy for risk-free rate and Eurodollar trades with a slight adjustment to libor. Packs - packs refer to sets of four representing one year.

The front pack, consisting of the first four eurodollar futures is called the "white pack. The rest have colors too purple, pink, silver, copper etcbut the first four packs are really the only liquid eurodollars. Bundles - bundles refer to all the eurodollars up to the given pack. So the green bundle would be the green, red and white packs all together "bundled" up. A basis point is one hundreth of a percent.

Most rate instruments are quoted in bps. A 5 year swap lasts for 5 years and is considered to have a 5 year tenor. The payments will occur as schedule for 5years until the swap matures. So all the maturities and coupons are priced off the "settle" date instead of the trade date. Fixed-Float swap - also known as just "swaps" or "vanilla swaps. One side pays a fixed rate and the counterparty pays a floating rate usually libor. These are quoted by the fixed rate, the amount is either in notional or pv01 present value of a 1bp move in rates, sometimes called duration in practice and buyer pays fixed.

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In the US the convention for these is 3month semi-bond, which means the fixed payments happen "semi-bond" style semi-annually, like a bond and the float payments occur on 3month libor resets. Note, the convention is that buyer pays fixed. I refer to these as "I" pay fixed because my payer swap is my counterparty's receiver swap and visa-versa.