Singapore Central Bank’s Exchange Rate Policy Explained: Why MAS Uses the S$NEER Instead of Interest Rates 
BOJ Rate Decision in Focus as Sticky Inflation, Weak Yen Shape USD/JPY and Nikkei Outlook 
Gold Shines on Oil Relief: Buy Dips at $4160, Targeting $4305 as Bullish EMAs Dominate 
Fed Holds Interest Rates Steady as Kevin Warsh Says Rising Treasury Yields Tighten Financial Conditions 
RBA Signals More Rate Hikes Possible as Australia Battles Stubborn Inflation 
Gold’s Bull Run Intact: Safe-Haven Bids Overpower Treasury Yield Pressure 
SpaceX Earnings Preview: Bernstein Says 4 Key Factors Will Drive Long-Term Valuation 
In the recent past, markets have been so cautious on the potential impact of Fed balance sheet normalization on interest rate volatility markets.
At a high level, though in principle the return of significant mortgage risk to the private market could drive a bid for gamma, in practice we find that options hedgers are unlikely to take down much of this supply. This suggests the direct impact on vols should be limited.
While markets have priced in a rather aggressive normalization, as net T-bill issuance again turns negative into April, and with no debt ceiling resolution expected prior the fall “drop-dead” date, we expect repo to remain rich to Fed funds.
Receive in $100k/bp of a 3Mx3M GC swap versus paying in $100k/bp of a 3Mx3M OIS swap at @ a spread of -1bp (both swaps start on 6/30/17 and mature on 9/29/17).
Stay long1-year expiry A+10 2s/5s curve caps versus A-20 curve floors.
Stay long $1bn notional of 1-year single-look A+10 2s/5s CMS curve caps (observation date 3/19/18, strike 0.41%) versus $1bn notional of 1-year singlelook A-20 2s/5s CMS curve floors (observation date 3/19/18, strike 0.11%) at a premium of 4.25c. P/L since inception: -1.2bp.
