Halister News

(Bloomberg) -- The U.S. rates options market is pricing a weekend straddle on 10-year swap rates with a breakeven of about 4.3bps, which is on par with previous non-event risk weekends, while Trump ramps up rheotric on North Korea.

• Treasury futures low-delta call skews have started to fade the richening seen since Trump’s “fire and fury” comment, see chart here, as OTC gamma edges lower
• The Korean market response has been modest with USD/KRW rising about 1.7% and Korean CDS widening only about 10bps; implied vol in Korean markets remain below/near long-term averages, highlighting the pricing of an all-out conflict in the peninsula remains remote; see more here
• NOTE: A regime shift in vol will be best captured with long- convexity exposure combined with tactical shorts rather than tail-risk strategies betting on mean-reverting vol spikes, see analysis here
• NOTE: Tanvir Sandhu is an interest-rate and derivatives strategist who writes for Bloomberg. The observations he makes are his own and are not intended as investment advice

To contact the reporter on this story: Tanvir Sandhu in London at tsandhu17@bloomberg.net To contact the editors responsible for this story: Ven Ram at vram1@bloomberg.net Scott Hamilton