The political pressure narrative seems overblown--there's a finite amount of focus, and it seems not unlikely that the Fed may benefit from being (relatively) ignored in the face of... take your pick of the election "firsts" we're about to experience.
I am literally combining two spreads right. One is long, saying that less cuts will be priced in (or that the right amount of cuts are priced in) and the other is short saying more will be priced in. You could theoretically just play the Z4Z5 spread if you want.
Update on this one: the H4Z4Z5 spread is now trading at -0.02, pricing pretty much the same amount of cuts in 2024 as 2025
This post aged well :)
I think you're better off doing a h5/h6 bear flattener through options
There’s no frigging way we’re getting 150bp of cuts this year, no way Powell wants to be the next Arthur Burns !
The political pressure narrative seems overblown--there's a finite amount of focus, and it seems not unlikely that the Fed may benefit from being (relatively) ignored in the face of... take your pick of the election "firsts" we're about to experience.
Why would you put on the H4/Z4 bull spread side if you think short term rates are due to go higher here?
I understand the Z4/Z5 bear spread side as rate cuts are pushed out, but that H4 long is confusing me.
I am literally combining two spreads right. One is long, saying that less cuts will be priced in (or that the right amount of cuts are priced in) and the other is short saying more will be priced in. You could theoretically just play the Z4Z5 spread if you want.
Isn't the inverse true? SR3H4 goes up if rate expectations go down (more cuts priced in). Or are you not trading SR3?
I'm newer to this, just trying to understand this last nuance.
The SFRH4H5 or H4Z4 spread goes down (more negative) if rate cut expectations increase. -150bps on H4-H5 = 150bps of rate cuts btwn mar 24 to 25
Oh because it's a spread, so H4-H5 = -160bps and that will flatten.
Z4-Z5 only has 50bps of cuts priced if I understand it now. Which seems light, really hope I'm getting it now.
Man, trying to learn SOFR futures trading while fighting COVID shivers is next level.
any thoughts on SONIA and Euribor?
Both have same characteristics as SOFR (loads of cuts in March 24 to March 25, and only a little in next year)
Economic situation is different to the US and the UK still have significant inflation, although falling rapidly
Honestly I think that might be a bit more accurate but has still probably gotten ahead of itself. ECB will likely do whatever the Fed does.