Ratesmaggedon 2: The Ratening
This time it's...not that important
Readers of Citrini Research who’ve been here for longer than a few months will remember that the best thing I wrote all year in terms of alpha:wordcount ratio was my end of October article covering the BoJ/QRA/FOMC triple-play I titled “Ratesmaggedon”
I said 6 right things (fade QRA hype by going long bonds, short USDJPY, short euribor H4H5, buy the dip on AI, monetize puts on SPX, exit Eurostoxx shorts) and 1 wrong thing (AUDNZD can go higher).
What you might not know about the macro/rates side of that was most of the insights were the result of a meeting I had with Steve Hou in late October, where we got into whether it was time to go long, what the net impact of fiscal spending driven incremental supply would be and whether the market had gone too far on selling duration.
I tweeted about it here
And, just like I said in the October article, I’m so far from an expert on this stuff. I’m wide open about the fact that the only reason I care about any of it is because I want to trade.
Artificial Intelligence? I wouldn’t know the difference between a H100 and an F150 if I didn’t want to trade it.
GLP-1s? I dropped out of med school specifically so I wouldn’t have to learn medicine, but I wanted to trade it.
Macroeconomics and Fiscal Policy? Dear God, why would I want to know anything about that beyond the absolute minimum necessary to trade it.
Steve, however, has a PhD in economics and wrote his thesis about Treasury debt management and supply/demand of Treasuries. Not only is he genuinely interested in this stuff, but he’s qualified to speak about it in a manner that we can assume is not all too dissimilar from the PhD economists making the decisions. So, in keeping with the trend of “speaking with people who know wtf they’re talking about”, I tend to bother him when we get a week like this. As you can tell from the outcome of our last rates focused conversation in October, they tend to be pretty helpful.
I’ve recently begun using fireflies.ai, which is an AI notetaker for google meet that is crazy accurate, and using it made me realize I can directly share this conversation and conversations like it (with channel checks in the industry or analysts who are better than me at specific sectors) without having to worry about getting recording equipment and becoming good at audio editing.
So, today, at 2:30pm until the market closed, I went back and forth between talking with Steve and juggling a bunch of SPX & treasury futures options delta I had on into the announcement of treasury financing. And I had an AI notetaker summarize and transcribe it. It did a surprisingly good job, and interestingly enough got all the acronyms correct as well. I’m posting it below the paywall in case anyone would like to take a look, as well as writing out some thoughts on the macro events this week.