Halister News

(Bloomberg) -- Treasury skews have flipped in favor of upside as North Korea risks rise again, while ATM vols still remain well contained near record lows.

• Treasury skews for this year have flipped in favor of calls for the first time since June (see chart here of 25-delta 3-month skew); richening of upside can be seen across the surface here, while 1-month 50-delta has only risen about 50bp to 4.06% since Trump’s “fire and fury” comment
• In the OTC space, while USD 3m10y has only risen about 0.20bp/day to 4bp/day, short-dated skews on 10-year tenor have turned lower, with receivers trading equal to payers
  • See chart here of spread between USD 3m10y 25bp OTM payer vol and 25bp OTM receiver vol 
• 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: From July 14, Zero-cost USD rates receiver spreads; see more 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 Anil Varma