Scary Stories
Thank god for the flattener.
Monday's action in rates breathed life into what might have otherwise been a somewhat tedious session for macro watchers, who can't make it through the day without a narrative to latch onto.
In that regard, the bear flattening impulse was a godsend. It opens the door to "policy mistake" banter and, relatedly, creates a "growth scare" optic. The US 5s30s tightened inside 85bps, the flattest since April 2020 (figure below).
We've seen this movie before. Back in Ju
You had me at (sold) “strangle sellers”.
Seriously, someone should strangle them. It isn’t without some wishful thinking that the arcana of dealer positioning, chronicled on these pages, had an FAQ section, at least for the acronyms.
If we can infer the importance of dealer positioning by how often we are reading about it here, we are (collectively speaking) called to scratch our (collective) heads. Yet, we remain subscribed. I’ve gained little toe-hold on the vernacular but it seems important to someone who I think is important (to heed) so I stay tuned, hoping to gain clarity on stuff like dealers’ gamma exposure.
Granted, some of us are boxing above our weight.
Case in point, rVol (realized volatility). ““As rVol softens, systematic strategies are able to mechanically re-allocate on a lagged-basis, while simultaneously, the reversal in spot sees CTA Trend forced to cover nascent shorts and begin to re-lever long exposures,” Nomura’s Charlie McElligott said Monday.”
That’s above my pay-grade by more tiers than I’ll admit. Just sayin’… I don’t think I’m alone here.
“MH 28 Market Huddle Exclusive: Charlie McElligott’s Gamma graph explained” on Youtube may help.
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