A Walk Down STIR Lane
Carry, Taylor rules and mispricings across 7 curves ahead of the July meeting cluster
A warm welcome to the new readers who’ve joined us over the past fortnight. You’ve picked a decent week for it. We have 5 central bank decisions landing inside 10 days, an oil shock that’s now 5 months old and still setting the terms of the debate, and 7 OIS curves that have each drawn their own conclusions about what comes next.
I have been curious about relative pricing in STIR-land and wanted to put together some trade thoughts for my readers after carefully analysing the market. Today’s post runs the full rates strip across USD, EUR, GBP, JPY, NZD, AUD and CAD, all benchmarked to 3 March, the first full session after the Israel-US-Iran conflict widened and Brent lurched from USD 72 towards 120. That baseline matters. Everything the curves have done since then has been a referendum on one question: is this an adjustment to an energy shock, or the start of a cycle?
The curves answer differently by currency, and that’s where it gets interesting. Some of them agree with their respective central bank. Some of them are arguing with it. I’ll show you which is which, quantify the carry on offer for taking either side, and finish with a few trades I am considering. It’s a bit rates-geeky, so I hope some of you will enjoy the conclusions.
For those less versed in the world of short-term interest rates (STIR) and OIS (overnight index swaps), I have written an educational piece that, as always on this site, is absolutely free.
A Guide To Short-Term Interest Futures (STIR)
STIR contracts stand for short-term interest rates securities which are futures on global exchanges pricing in various maturity forward contracts and options. The underlying are generally money-market rates from various different currencies and markets with the goal of efficiently hedging or speculating on the direction of money market rates which are o…
If you are considering joining the pack of members, I am still running a 20% discount until the end of July. And yes, you get the full dashboard, strategy and daily chart pack on top of it over at pa-globalmacro.com.
Let’s now dig in.
