MARKET OVERVIEW: RATES-MAGGEDON EDITION

Enter the QRA/Geopol/BoE/AAPL/Uedadome

Market was reasonably constructive today as geopolitical tensions ease on Israel’s execution of a “slow roll” invasion resulting in a lower probability of regional conflict in response to an all-out ground invasion that forces gulf states to declare allegiance - in a surprising twist, it seems that rates are going to be more interesting than commodities despite the…*checks notes*…ground war in the Middle East. Crazy times, eh?

Trading preparations for the FOMC/BOE/BOJ were in full swing entered - dollar eases, yen strengthened, rates got a bit of a reprieve midday from the treasury announcement and oil and gold came off highs. 

I think the risk reward on short oil/long gold is decent here and somewhat geopolitically neutral assuming Israel continues its “slow roll” invasion, the tail risk of regional conflict has receded back to the tail of probabilities, where it belongs. Today we saw a weakening dollar, oil down, yen up, gold coming off the highs.

In US rates we’ve got a significant move lower in SOFR swap spreads with 10s experiencing the most significant drop, which seems to be mostly technical and liquidity driven although I do believe there is an element of credit risk being perceived here.