TYVIX trade ideas
Novo ciclo decanal se formando no mercadoSe analisarmos os 3 mercados, Títulos americanos da divida pública de 10 anos (no topo), Ações (linha verde) e Commodities(linha amarela), perceberemos como está se formando um novo ciclo de 10 anos de baixa, assim que os títulos começarem a cair, iniciará esse novo ciclo. Este tipo de ciclo de mercado se dá quando as ações são as primeiras a cair e há um aumento grande nos títulos, logo após as commodities seguem as ações, ele se inicia quando os títulos começam a cair também, iniciando assim uma longa queda dos 3 mercados até que o oposto ocorra e entre em um ciclo de alta. (Fonte deste tipo de análise técnica: Martin Pring)
Bond market is anticipating Powell to go full volcker?Erm?! Powell reigns from the school of hard knocks he's conditioned/ a Paul volcker fan boy. Traditionally when inflation is the problem yes there's a time to tilt hawkish in this scenario disinflation is the problem. If they come out swinging in the mins.. it'll be a drastic mistake. If they don't suggest a rate cut as the fed funds rates are suggesting this will be a drastic mistake. The difference between the last Chinese devaluation and this time is interest rates. this time around worst case scenario Chinas global real estate bubble could collapse.. we're in for an intense next couple of weeks but we'll be able to anticipate what comes next
how to defuse the bombtheres a short amount of time to defuse the bomb. bonds and fic are reflecting the reality of the situation in china ie. when china devalues they import inflation and export deflation. hawkish retoric needs to calm down if anything we need dovish language, the pboc needs to step in and get their currency below the red line, and the 10 year note auction needs to go orderly. all of these things are not happening currently
the bond market says mr. powell, "you maaaaaaaddddd"this spike in treasury vol is due to repricing of rate cut expectations. yesterday post powell rate cut expecations for sept were roughly 30%. post trump/repricing. we're at 70-80% odds for another quarter point cut in sept. congrats el 'presedente you did it
ZIRP-unintended consequences--fisher international effectbased on interest rates and the importance of the euro and USD for global trade. we're seeing an irrational shift thats artificially effecting equity volatility. ZIRP or zero interest rate policy in euro zone. is driving demand for USD and us treasuries vs eurozone risk off assets. this flow is exploiting an already dramatic difference in interest rates globally. when bonds rally equities tend to fall. the bund last week hit an all time low of -20% yield on the german 10 year. aint that crazy people are dumb enough to buy an asset that has a 20% premium attached. thats right people are so afraid theyre willing to buy something and receive 20% less afterwards.. that being said people are choosing to go to US risk off USD and treasuries instead where they actually have a chance of making money. that transition is causing volatility. equity volatility is non-exsistant, but bond flows are overpowering flows.. INVESTORS MUST REMEMBER THE DISCOUNTING MECHANISM FOR FUTURE VALUE AND GROWTH IS.. THE RISK FREE RATE (US 10 YEAR YIELD) if the risk free rate is falling like a rock.. what is that saying about risk in US assets vs the world? thats exactly why im beyond bullish
growth concerns lurking in bonds-- a storm's a brewin'growth concerns still looming large, just lurking in the background. eurozone data and FOMC language may drive bond volatility higher. eurozone M3 showing the printing press is on
in order to weaken the euro participants are likely to buy DXY. in order to buy DXY theyre likely to buy bonds. we're in for weird awkward times where everyone trips over their feet.
since gold is also taking on its traditional role. with bond volatility about to rock the boat. now's golds time to shine. im holding 5 jnug $7 sept 20th calls. looking to leg a front end short call when i see the juice on call IV
the long nightthis is a realized volatility moment similar to december's move, but this time dovish tones may work in opposite fashioned. the fomc has placed themselves on the sides, however interest rate differentials will play a pivotal role on the months ahead. many have noticed rates, and currencies fluctiating like trump-coin.. and the expansion of velocity in the 10 year note market is exactly why. last time (decemeber) we managed to calm the market by flipping the dovish cue by powell and gang. we're now entering the same scenario excpet we dont have the tools to draw from. traditionally the fomc has maintained a 5bps interest rate cut range to draw from when things got drastic... currently we're at 2.50 bps that we can cut from, so half the firepower we're usually used to during a downturn, yes we're willing to engage in more QE and the fairy tale of modern monetary theory (what a joke) is growing. but much like a heroine addict you only can chase the dragon so many times. the kicker is that global QE is presenting a similar scenario of 'beggar thy neighbor' or competitive devaluation. we'll have to keep a close eye on this one going forth, but man o man are we in some funky times
Volatility GOT edition- the night King comethBuckle your seatbelts we're gearing up for a realized volatility rollercoaster ride. As I've been mentioning in past posts what we need to worry about isn't equity volatility but macro driven bond volatility that can spark contagion in equities. The levers of risk on risk off can be extreme (December melt down), but here's a basic premise of how the game works. Risk on yields up and capital flows easily into equities over bonds. Yields down capital is likely to remain in cash or cash equivalents. The spread between yeilds may intensify the effect due to the tightening effect. We've already begun to see responses to the night King (libor. Global rate path, China...etc) but his secret weapon comes from interest rate differentials and overall growth uncertainty
tyvix (bond volatility) says welcome to the year of the pigwelcome to the year of the pig. we're now in the later stages of the expansion. it may be scary but inflationary assets may shine and shimmer as the yield curve steepens. this chart shows the contraction/expansion of overall credit. FIC, entitlement reform, political uncertainties, and deflationary pressures will play an ongoing part. the question is will the macro uncertainties fade or be realized? we got a small taste of what this baby can do this December. lets hope the Fed knows what the hell theyre doing.lol
