Bank of Japan Signals Readiness for Near-Term Rate Hike as Inflation Nears Target 
Federal Reserve Faces Subpoena Delay Amid Investigation Into Chair Jerome Powell 
BOJ Rate Decision in Focus as Yen Weakness and Inflation Shape Market Outlook 
RBI Holds Repo Rate at 5.25% as India’s Growth Outlook Strengthens After U.S. Trade Deal 
Bank of Canada Holds Interest Rate at 2.25% Amid Trade and Global Uncertainty 
FxWirePro- Major Crypto levels and bias summary 
MAS Holds Monetary Policy Steady as Strong Growth Raises Inflation Risks 
South Africa Eyes ECB Repo Lines as Inflation Eases and Rate Cuts Loom 
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.
