GLOBAL INVESTMENT STRATEGY, EXECUTION AND RISK MANAGEMENT FOR INSTITUTIONAL INVESTORS

• Chaos reigned in the UK rates and FX markets last week as May’s Brexit deal was summarily rejected by members of both parties, resignations ensued and letters of no-confidence were written. One has to admire Theresa May’s tenacity and political guile in the face of what looked like insurmountable odds. While her deal may not survive in it’s current form (heading into the Nov 25^th EU summit to sign off on the final terms), the hard line Brexiteers are well short of the 48 votes they need to file an official vote of no confidence, suggesting a leadership challenge is unlikely for now. Even Dominic Raab has professed his support for May, despite resigning from her cabinet last week. Both May and Corbyn will address the CBI conference later today, followed by May’s trip to Brussels tomorrow/Wed to continue talks.

 

• Needless to say, the markets will remain very nervous this week and probably next. Aside from the Brexit talks, we’ve also got a busy supply calendar in EGBs, continuing budget talks in Italy and the Thanksgiving holiday on Thursday, impairing liquidity in the US from Wed pm until Friday.

 

• Let’s look at some charts…

 

CABLE held the bottom of the Jun-Nov range again, despite heightened volatility…

 

            SONIA has been very volatile, reflecting the moves in cable. We’re pricing in 95% of one 25bps hike by Dec ’19 this morning…

 

The UKT curve remains pinned to the wides in 10-30s, however, as G Z8 has been the market’s primary source of GBP rates risk. There was substantial demand for the long-end of the curve on Friday as real money investors came to the rescue, however, it wasn’t enough to reverse UKT 27-47s much. While most would agree the contract (and the UKT 4Q27s) looks rich on the curve here, the performance of the issue will be continue to be heavily influenced by the state of play in Parliament.  

           

           

UKT 4Q27-1F28 spread has been VERY closely watched of late. Our regression results late last week suggested this spread is about fair value given the move in rates, however, with the outlook for the 1F28s strong into Q1 due to APF demand and their eventual shift to CTD into G M9, we’re not surprised GEMMS see good interest to buy the 1F28s basis (or just do the 27-28s forward roll) on moves like this one. If there’s a flattener on the curve to fade this recent steepening, this is it.

 

           

 

            The 3-7yr sector of the gilts curve is all over the place with 0H22 and 2T24s very rich and neighbours cheap…

           

            More to come…

 

 

            Mark

 

 

 

 

 

 

image009.jpg@01D28D1B.42BD95C0">

 

Mark Funsch

 

O:            +44 (0) 203 - 143 - 4177

M:            +44 (0) 789 - 996 - 4051

E:             Mark.Funsch@AstorRidge.com

W:            www.AstorRidge.com

UK:          14-16 Dowgate Hill, London UK EC4R 2SU

US:          245 Park Ave, 39^th Floor, NY, NY, 10167

 

This research was prepared by Mark Funsch.  He is a consultant with Astor Ridge.  A history of his marketing commentaries can be provided upon request in compliance with the European Commission’s Market Abuse Regulation.  Astor Ridge takes no proprietary trading risk, has no market making facilities, and has no position in any security we discuss in this e-mail.  The views in this e-mail are those of the author(s) and are subject to change, and Astor Ridge has no obligation to update its opinions or the information in this publication. If this e-mail contains recommendations, those recommendations reflect solely and exclusively those of the author, and such opinions were prepared independently of any other interests, including those of Astor Ridge and/or its affiliates. This publication does not constitute personal investment advice or take into account the individual financial circumstances or objectives of the clients who receive it. The securities discussed herein may not be suitable for all investors. Astor Ridge recommends that investors independently evaluate each issuer, security or instrument discussed herein, and consult any independent advisors they believe necessary. The value of and income from any investment may fluctuate from day to day as a result of changes in relevant economic markets (including changes in market liquidity). The information herein is not intended to predict actual results, which may differ substantially from those reflected. Past performance is not necessarily indicative of future results. 

 

You should not use or disclose to any other person the contents of this e-mail or its attachments (if any), nor take copies. This e-mail is not a representation or warranty and is not intended nor should it be taken to create any legal relations, contractual or otherwise. This e-mail and any files transmitted with it are confidential, may be legally privileged, and are for the sole use of the intended recipient. Copyright in this e-mail and any accompanying document created by Astor Ridge LLP is owned by Astor Ridge LLP. 

 

Astor Ridge LLP is regulated by the Financial Conduct Authority (FCA):  Registration Number 579287

Astor Ridge LLP is Registered in England and Wales with Companies House:  Registration Number OC372185

Astor Ridge NA LLP is a member of FINRA/SIPC:  CRD Number 282626

Astor Ridge NA LLP is a member of the National Futures Association (NFA):  Firm ID Number 0499303

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Trade Rader

On my radar

1. Supply in Belgium on Monday 24s, 28s, 34s, 57s

 

2. Want to be short Bullets longs wings in back end of Europe as soft play on steepening – post PSPP

Trade mechanics:

Sell 23MM Bgb 1.6% Jun47 ( €50k/bp )

Buy 15,3MM Bgb 2 ¼ % Jun57 ( €42,5k/bp )
Buy 9MM Bgb 0.8% Jun27 ( €7,5k/bp )

Weights: -0.15 / +1 / +0.85
weights taken from regression but forced to be duration matched

Cix:

yield[BGB 1.6 06/22/47 Govt] - 0.15 * yield[BGB 0.8 06/22/27 Govt] - 0.85 * yield[BGB 2.25 06/22/57 Govt]

 

 

Current level:    -2.4 bp

Entry Target:      -2.7 bp

Add:                      -4.0 bp

Stop:                     -6.0 bp

First Target:        -0.5 bp

 

Graph:

 

 

Rationale:

• Belgian Supply in 47s on Monday, 19^th Nov
• Bgb 47’s look rich vs other points - See graph of Euro Semi Core Curves vs France
• Bgb 27 roll down the curve well
• Post PSPP reduced buying may cause semi-core curves to steepen – a secondary effect of steepening could be that bullets underperform wings

 

Graphs:

• Euro semi core curves vs France as baseline (zero)

 

 

 

 

Carry:

• < -0.1bp /3mo @ -10bp repo spread

 

Risks:

• The 47s stay bid as the benchmark 30y
• The generic curve 27s to 47s does not steepen and the expected cheapening of 47s doesn’t occur on the structure
• The 57s as a less favoured 40y, do not receive buying support

 

 

 

James Rice

 

image001.jpg@01D21F13.B69A4950">

UK: 14-16 Dowgate Hill, London ec4r 2su

US: 245 Park Ave 39^th Fl, New York NY 10167

 

Office:   +44 (0) 203 - 143 - 4178

Mobile:  +44 (0) 754 - 011 - 7705

Email:     James.Rice@AstorRidge.com

Web:       www.AstorRidge.com

 

This marketing was prepared by James Rice, a consultant with Astor Ridge.  It is not appropriate to characterize this e-mail as independent investment research as referred to in MiFID and that it should be treated as a marketing communication even if it contains a trade recommendation. A history of marketing materials and research reports can be provided upon request in compliance with the European Commission’s Market Abuse Regulation.  Astor Ridge takes no proprietary trading risk, has no market making facilities, and has no position in any security we discuss in this e-mail.  The views in this e-mail are those of the author(s) and are subject to change, and Astor Ridge has no obligation to update its opinions or the information in this publication. If this e-mail contains opinions or recommendations, those opinions or recommendations reflect solely and exclusively those of the author, and such opinions were prepared independently of any other interests, including those of Astor Ridge and/or its affiliates. This publication does not constitute personal investment advice or take into account the individual financial circumstances or objectives of the those who receive it. The securities discussed herein may not be suitable for all investors. Astor Ridge recommends that investors independently evaluate each issuer, security or instrument discussed herein, and consult any independent advisors they believe necessary. The value of, and income from, any investment may fluctuate from day to day as a result of changes in relevant economic markets (including changes in market liquidity). The information herein is not intended to predict actual results, which may differ substantially from those reflected. Past performance is not necessarily indicative of future results. 

 

You should not use or disclose to any other person the contents of this e-mail or its attachments (if any), nor take copies. This e-mail is not a representation or warranty and is not intended nor should it be taken to create any legal relations, contractual or otherwise. This e-mail and any files transmitted with it are confidential, may be legally privileged, and are for the sole use of the intended recipient. Copyright in this e-mail and any accompanying document created by Astor Ridge LLP is owned by Astor Ridge LLP. 

 

Astor Ridge LLP is regulated by the Financial Conduct Authority (FCA):  Registration Number 579287

Astor Ridge LLP is Registered in England and Wales with Companies House:  Registration Number OC372185

Astor Ridge NA LLP is a member of FINRA/SIPC:  CRD Number 282626

Astor Ridge NA LLP is a member of the National Futures Association (NFA):  Firm ID Number 0499303

Astor Ridge NA LLP is Registered in England and Wales with Companies House:  Registration Number OC401796

 

 

MULTI ASSET UPDATE  Its not been a MASSIVE week but we REMAIN on HIGH ALERT given some VULNERABLE locations.

The EURO remains heavy and unresponsive, poised to FAIL and FAIL in a big way. NEXT WEEK could really drop, providing 1.1400 isn’t breached.

**Trade idea BUY Euro Dec 11100.00 puts @15 ticks, and ADD below 1.1301 NOW 18.

EM BONDS continue to do well and many USD crosses well on the way to major drops. The USD INR short is starting to develop as a sizeable top has been confirmed. These views are NOW very much for the long-term, especially if US yields STALL.

EQUITIES ** REMAIN in TROUBLE** We CONTINUE to SIT on KEY levels and just about holding last month’s lows with LITTLE bounce-recovery this week! Similar to the EURO its predominantly been a sideways week, on a week when expectation has been for a major POP. Should last month’s lows be breached do expect us to emulate Octobers range.

**Trade idea BUY DAX DEC 11300-11200 put spread 33.0 ticks and ADD sub 11400. NOW 18.**

CORE BONDS : Europe has rallied well this week driven by CTA’s who are now long. I still maintain any GREATER progress will come from OTHER market influence. They need to be driven.

US CURVES continue to steepen in the back end and show little signs of giving up the BULL STEEPENER bias, that said this whole yield-curve directional view NEEDS discussion.

Positions :

**Buy US  2-30 entry 36.418 now 49.716**

**Buy US 10-30 entry 14.426 now 24.754**

 

 

ASTOR RIDGE : Independent Ideas, Research, Liquidity, Anonymity and Trusted Experience.

 

• UK:         14-16 Dowgate Hill, London EC4R 2SU
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• •             Astor Ridge does not provide independent research. We have no dedicated or paid strategists, research portals, or research subscriptions. However, you may receive unsolicited marketing communications from our Introducing Brokers from time to time, which may refer to specific trade recommendations. These recommendations are based solely on the opinion of the author, and are not official research recommendations of Astor Ridge.We have considered guidance from ESMA, and any written material from our Introducing Brokers that might fall within the scope of the rules will be provided for free, and made publicly available on our website, to any EU Investment firm that registers for it.
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• •             If you are a MiFID firm and do not agree with our approach, and instead believe that you must pay for written commentary or trade recommendations, then Astor Ridge will accept  payments determined by    you.
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• •            
• •             I also direct you to our disclaimer on our email footer:
• •             This marketing was prepared by Christopher Williams, a consultant with Astor Ridge.  It is not appropriate to characterize this e-mail as independent investment research as referred to in MiFID and that it should be treated as a marketing communication even if it contains a trade recommendation. A history of marketing materials and research reports can be provided upon request in compliance with the European Commission’s Market Abuse Regulation.  Astor Ridge takes no proprietary trading risk, has no market making facilities, and has no position in any security we discuss in this e-mail.  The views in this e-mail are those of the author(s) and are subject to change, and Astor Ridge has no obligation to update its opinions or the information in this publication. If this e-mail contains opinions or recommendations, those opinions or recommendations reflect solely and exclusively those of the author, and such opinions were prepared independently of any other interests, including those of Astor Ridge and/or its affiliates. This publication does not constitute personal investment advice or take into account the individual financial circumstances or objectives of the those who receive it. The securities discussed herein may not be suitable for all investors. Astor Ridge recommends that investors independently evaluate each issuer, security or instrument discussed herein, and consult any independent advisors they believe necessary. The value of, and income from, any investment may fluctuate from day to day as a result of changes in relevant economic markets (including changes in market liquidity). The information herein is not intended to predict actual results, which may differ substantially from those reflected. Past performance is not necessarily indicative of future results. 
• •            
• •             You should not use or disclose to any other person the contents of this e-mail or its attachments (if any), nor take copies. This e-mail is not a representation or warranty and is not intended nor should it be taken to create any legal relations, contractual or otherwise. This e-mail and any files transmitted with it are confidential, may be legally privileged, and are for the sole use of the intended recipient. Copyright in this e-mail and any accompanying document created by Astor Ridge LLP is owned by Astor Ridge LLP. 
• •            
• •             Astor Ridge LLP is regulated by the Financial Conduct Authority (FCA):  Registration Number 579287
• •             Astor Ridge LLP is Registered in England and Wales with Companies House:  Registration Number OC372185
• •             Astor Ridge NA LLP is a member of FINRA/SIPC:  CRD Number 282626
• •             Astor Ridge NA LLP is a member of the National Futures Association (NFA):  Firm ID Number 0499303
• •             Astor Ridge NA LLP is Registered in England and Wales with Companies House:  Registration Number OC401796
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• •             If there is anything else you require from us to continue receiving our market communications, or prefer a different medium for access (e.g. publicly available password protected access on the Astor Ridge website), please do let me know.
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• •             Otherwise, if you are more comfortable to deem consent by simply acknowledging receipt of this email, and continuing our trading relationship under our updated terms of business below, without registering your disapproval, we are happy to proceed on that basis.
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• •             Many thanks,
• •            
• •             Chris

 

 

 

 

TECHNICAL VIEW of US swaps vs  AUD : US AUD has some great HISTORICAL extremes.

The US continues to be where the OPPORTUNITY is. Is the US now TOO CHEAP.

I have looked at US verses AUD and we have some decent extensions and previous levels to work from.

Interestingly there are many FAMILIAR RSI extensions dating back to 1997 and 2006 AGAIN.

The 5yr AUD-US looks the most attractive technically.

 

 

ASTOR RIDGE : Independent Ideas, Research, Liquidity, Anonymity and Trusted Experience.

 

• UK:         14-16 Dowgate Hill, London EC4R 2SU
• US:          245 Park Ave, 39^th Floor, NY, NY, 10167
• Office:   +44 (0) 203 143 4174
• Mobile:  +44 (0) 7980708683
• Email:     chris.williams@astorridge.com
• Web:       www.AstorRidge.com
•  
• •             I provide our research notification below for your convenience:
• •            
• •             Research Unbundling:
• •            
• •             Astor Ridge does not provide independent research. We have no dedicated or paid strategists, research portals, or research subscriptions. However, you may receive unsolicited marketing communications from our Introducing Brokers from time to time, which may refer to specific trade recommendations. These recommendations are based solely on the opinion of the author, and are not official research recommendations of Astor Ridge.We have considered guidance from ESMA, and any written material from our Introducing Brokers that might fall within the scope of the rules will be provided for free, and made publicly available on our website, to any EU Investment firm that registers for it.
• •            
• •             If you are a MiFID firm and do not agree with our approach, and instead believe that you must pay for written commentary or trade recommendations, then Astor Ridge will accept  payments determined by    you.
• •            
• •            
• •            
• •             I also direct you to our disclaimer on our email footer:
• •             This marketing was prepared by Christopher Williams, a consultant with Astor Ridge.  It is not appropriate to characterize this e-mail as independent investment research as referred to in MiFID and that it should be treated as a marketing communication even if it contains a trade recommendation. A history of marketing materials and research reports can be provided upon request in compliance with the European Commission’s Market Abuse Regulation.  Astor Ridge takes no proprietary trading risk, has no market making facilities, and has no position in any security we discuss in this e-mail.  The views in this e-mail are those of the author(s) and are subject to change, and Astor Ridge has no obligation to update its opinions or the information in this publication. If this e-mail contains opinions or recommendations, those opinions or recommendations reflect solely and exclusively those of the author, and such opinions were prepared independently of any other interests, including those of Astor Ridge and/or its affiliates. This publication does not constitute personal investment advice or take into account the individual financial circumstances or objectives of the those who receive it. The securities discussed herein may not be suitable for all investors. Astor Ridge recommends that investors independently evaluate each issuer, security or instrument discussed herein, and consult any independent advisors they believe necessary. The value of, and income from, any investment may fluctuate from day to day as a result of changes in relevant economic markets (including changes in market liquidity). The information herein is not intended to predict actual results, which may differ substantially from those reflected. Past performance is not necessarily indicative of future results. 
• •            
• •             You should not use or disclose to any other person the contents of this e-mail or its attachments (if any), nor take copies. This e-mail is not a representation or warranty and is not intended nor should it be taken to create any legal relations, contractual or otherwise. This e-mail and any files transmitted with it are confidential, may be legally privileged, and are for the sole use of the intended recipient. Copyright in this e-mail and any accompanying document created by Astor Ridge LLP is owned by Astor Ridge LLP. 
• •            
• •             Astor Ridge LLP is regulated by the Financial Conduct Authority (FCA):  Registration Number 579287
• •             Astor Ridge LLP is Registered in England and Wales with Companies House:  Registration Number OC372185
• •             Astor Ridge NA LLP is a member of FINRA/SIPC:  CRD Number 282626
• •             Astor Ridge NA LLP is a member of the National Futures Association (NFA):  Firm ID Number 0499303
• •             Astor Ridge NA LLP is Registered in England and Wales with Companies House:  Registration Number OC401796
• •            
• •            
• •             If there is anything else you require from us to continue receiving our market communications, or prefer a different medium for access (e.g. publicly available password protected access on the Astor Ridge website), please do let me know.
• •            
• •             Otherwise, if you are more comfortable to deem consent by simply acknowledging receipt of this email, and continuing our trading relationship under our updated terms of business below, without registering your disapproval, we are happy to proceed on that basis.
• •            
• •             Many thanks,
• •            
• •             Chris

 

 

 

 

GILTS...

> Between the barrage of headlines and mountains of news to read through (please see our chat), we'll have a UKT 1T 37s AUCTION to deal with at 10:30, just when May addresses her peers. As if the market hasn't been screwed up enough, we're supposed to bid on £2bn of this paper while she’s deflecting a barrage of criticism... Good grief.

 

> Quick Preview:

1) UKT 1T37s are 1.933% this am, well off the Nov 1 levels of 1.77%. The UKT 37-47s spread, which remained stubbornly flat this time yesterday is now about a bp steeper, a sign of short covering in 37s…

 

 

2) UKT 4Q27-1T37 is at its steepest yield spread since nov '17. As the chart shows, this spread has steepened over the past few weeks regardless of how G Z8 trades, a clear sign of a supply concession.

 

3)  The curve weighted 4Q27-1T37-1H47 fly (.7/2.0/1.3) is also at i's cheapest with momentum levels (RSIs) back to overdone zone.

 

4) Much has been written about the weight of 15yr+ supply between now and year-end with today's 37s, some long linkers and UKT 1/49s coming between now and mid Dec. We do have ~£2.4bn in cpns on Dec 7th to help but GEMMs are more worried about demand and distribution into a very twitchy market. The path of least pain is cheaper and steeper.

 

5) Want a couple lower-beta fade the steepening trades?

UKT 4Q27 into UKT 1F 28 is back to +14bps with the Z-sprd box at the top of the flattening channel in place since June.

UKT 27-28 Z-sprd box

 

UKT 4Q27 into UKT 4T30 not nearly as ‘clean’ as the 28s but the 30s have cheapened significantly and are at the cheapest to 4Qs since Sep 17…

 

4Q27-4T30 yield sprd…

 

 

 

 

 

We'll keep u posted.

 

 

image009.jpg@01D28D1B.42BD95C0">

 

Mark Funsch

 

O:            +44 (0) 203 - 143 - 4177

M:            +44 (0) 789 - 996 - 4051

E:             Mark.Funsch@AstorRidge.com

W:            www.AstorRidge.com

UK:          14-16 Dowgate Hill, London UK EC4R 2SU

US:          245 Park Ave, 39^th Floor, NY, NY, 10167

 

This research was prepared by Mark Funsch.  He is a consultant with Astor Ridge.  A history of his marketing commentaries can be provided upon request in compliance with the European Commission’s Market Abuse Regulation.  Astor Ridge takes no proprietary trading risk, has no market making facilities, and has no position in any security we discuss in this e-mail.  The views in this e-mail are those of the author(s) and are subject to change, and Astor Ridge has no obligation to update its opinions or the information in this publication. If this e-mail contains recommendations, those recommendations reflect solely and exclusively those of the author, and such opinions were prepared independently of any other interests, including those of Astor Ridge and/or its affiliates. This publication does not constitute personal investment advice or take into account the individual financial circumstances or objectives of the clients who receive it. The securities discussed herein may not be suitable for all investors. Astor Ridge recommends that investors independently evaluate each issuer, security or instrument discussed herein, and consult any independent advisors they believe necessary. The value of and income from any investment may fluctuate from day to day as a result of changes in relevant economic markets (including changes in market liquidity). The information herein is not intended to predict actual results, which may differ substantially from those reflected. Past performance is not necessarily indicative of future results. 

 

You should not use or disclose to any other person the contents of this e-mail or its attachments (if any), nor take copies. This e-mail is not a representation or warranty and is not intended nor should it be taken to create any legal relations, contractual or otherwise. This e-mail and any files transmitted with it are confidential, may be legally privileged, and are for the sole use of the intended recipient. Copyright in this e-mail and any accompanying document created by Astor Ridge LLP is owned by Astor Ridge LLP. 

 

Astor Ridge LLP is regulated by the Financial Conduct Authority (FCA):  Registration Number 579287

Astor Ridge LLP is Registered in England and Wales with Companies House:  Registration Number OC372185

Astor Ridge NA LLP is a member of FINRA/SIPC:  CRD Number 282626

Astor Ridge NA LLP is a member of the National Futures Association (NFA):  Firm ID Number 0499303

Astor Ridge NA LLP is Registered in England and Wales with Companies House:  Registration Number OC401796

 

 

EURO SPECIAL : This is a VERY key day we are FAILING the 1.1301 resistance and could be at 1.0735 by mid December.

 

 

The EURO remains a VERY BEARISH trade and todays close could be the clincher. We have failed the previous low 1.1301 and poised ideally for a NEW low today.

If we fail then it’s a MAY style drop.

           Fridays suggested position.

           Worth a quick DOWNSIDE play for the weekend ..

           BUY the EURO DEC 11200- 11100 put spread 15 tics ( NOW 25 tics).

 

 

ASTOR RIDGE : Independent Ideas, Research, Liquidity, Anonymity and Trusted Experience.

 

• UK:         14-16 Dowgate Hill, London EC4R 2SU
• US:          245 Park Ave, 39^th Floor, NY, NY, 10167
• Office:   +44 (0) 203 143 4174
• Mobile:  +44 (0) 7980708683
• Email:     chris.williams@astorridge.com
• Web:       www.AstorRidge.com
•  
• •             I provide our research notification below for your convenience:
• •            
• •             Research Unbundling:
• •            
• •             Astor Ridge does not provide independent research. We have no dedicated or paid strategists, research portals, or research subscriptions. However, you may receive unsolicited marketing communications from our Introducing Brokers from time to time, which may refer to specific trade recommendations. These recommendations are based solely on the opinion of the author, and are not official research recommendations of Astor Ridge.We have considered guidance from ESMA, and any written material from our Introducing Brokers that might fall within the scope of the rules will be provided for free, and made publicly available on our website, to any EU Investment firm that registers for it.
• •            
• •             If you are a MiFID firm and do not agree with our approach, and instead believe that you must pay for written commentary or trade recommendations, then Astor Ridge will accept  payments determined by    you.
• •            
• •            
• •            
• •             I also direct you to our disclaimer on our email footer:
• •             This marketing was prepared by Christopher Williams, a consultant with Astor Ridge.  It is not appropriate to characterize this e-mail as independent investment research as referred to in MiFID and that it should be treated as a marketing communication even if it contains a trade recommendation. A history of marketing materials and research reports can be provided upon request in compliance with the European Commission’s Market Abuse Regulation.  Astor Ridge takes no proprietary trading risk, has no market making facilities, and has no position in any security we discuss in this e-mail.  The views in this e-mail are those of the author(s) and are subject to change, and Astor Ridge has no obligation to update its opinions or the information in this publication. If this e-mail contains opinions or recommendations, those opinions or recommendations reflect solely and exclusively those of the author, and such opinions were prepared independently of any other interests, including those of Astor Ridge and/or its affiliates. This publication does not constitute personal investment advice or take into account the individual financial circumstances or objectives of the those who receive it. The securities discussed herein may not be suitable for all investors. Astor Ridge recommends that investors independently evaluate each issuer, security or instrument discussed herein, and consult any independent advisors they believe necessary. The value of, and income from, any investment may fluctuate from day to day as a result of changes in relevant economic markets (including changes in market liquidity). The information herein is not intended to predict actual results, which may differ substantially from those reflected. Past performance is not necessarily indicative of future results. 
• •            
• •             You should not use or disclose to any other person the contents of this e-mail or its attachments (if any), nor take copies. This e-mail is not a representation or warranty and is not intended nor should it be taken to create any legal relations, contractual or otherwise. This e-mail and any files transmitted with it are confidential, may be legally privileged, and are for the sole use of the intended recipient. Copyright in this e-mail and any accompanying document created by Astor Ridge LLP is owned by Astor Ridge LLP. 
• •            
• •             Astor Ridge LLP is regulated by the Financial Conduct Authority (FCA):  Registration Number 579287
• •             Astor Ridge LLP is Registered in England and Wales with Companies House:  Registration Number OC372185
• •             Astor Ridge NA LLP is a member of FINRA/SIPC:  CRD Number 282626
• •             Astor Ridge NA LLP is a member of the National Futures Association (NFA):  Firm ID Number 0499303
• •             Astor Ridge NA LLP is Registered in England and Wales with Companies House:  Registration Number OC401796
• •            
• •            
• •             If there is anything else you require from us to continue receiving our market communications, or prefer a different medium for access (e.g. publicly available password protected access on the Astor Ridge website), please do let me know.
• •            
• •             Otherwise, if you are more comfortable to deem consent by simply acknowledging receipt of this email, and continuing our trading relationship under our updated terms of business below, without registering your disapproval, we are happy to proceed on that basis.
• •            
• •             Many thanks,
• •            
• •             Chris

 

 

 

 

This has been put together in conjunction with David Sansom, we both agree its worth further discussion given it is a MAJOR OPPORTUNITY and tight stop.

USFS 10-20 A GOLDEN OPPORTUNITY STILL!

The HISTORICAL opportunity remains, only the SIXTH time in 18 years hence needs discussion.

The RSI also extends to the weekly denoting a very long term opportunity is here.    

 

David’s previous ideas around the trade.

Bottom line: USD 10y20y is at fascinating technical levels and makes a good candidate for a duration long in the US

 

Trades:
- Simply receive USD 10y20y

- Mid-curve receiver spreads/ladders on 10y20y with 6m or 1y expiries
- Receiver USD 10y20y vs paying EUR 10y20y

 

See below for candidate structures.

 

Rationale: I don’t usually take technical analysis as my starting point, but a hat-tip to my colleague Chris Williams for the monthly chart of the USD 10y20y (20y rate, 10y forward) below. He has highlighted the powerful technical signals of the current level, in terms of RSI and 100-month moving average, using data stretching back to 1996.

The DAILY is failing the 3.4116 previous high so could place stops above this.

We are failing the previous high 3.4116 and now the multi-year 50% ret 3.3449. We should head nicely lower and certainly don’t be afraid to ADD significantly if the 200 day moving average 3.0569 is breached!

 

The technical observations are timely as I am on the lookout for a place to receive on the USD curve. The results of yesterday’s US Mid-term elections have delivered a small Democratic majority in the House of Representatives: my high-level view is that this reduces the chances of further tax cuts and some of the more expansive spending plans for Defence (and certain building projects in the border zone). As a consequence changes on both sides of the budget look more positive in terms of the budget deficit, and lessens somewhat my fears of a ramping of long-end Treasury supply. This allows me to consider trades with a 10-30 flattening exposure, such as receiving 10y20y. Recall that the 10y20y forward rate is essentially one-part 30y outright plus 0.5-part 10y-30y curve: hence a reduction in the prospects for 10-30 steepening make this more of an essentially bullish trade (cf 5y5y, which is equal parts direction and curve).

 

How best to position for a failure of 10y20y at the 100-month moving average?

 

Simply receiving the 10y20y forward outright has the merit of ample liquidity and may act as a hedge to portfolios with more bearish positioning at the short end. The US 10y20y rate has got slightly ahead of Fed expectations over the past 6 months: the chart shows the residual of the regression between 10y20y and the 2y1y rate. On this basis, 10y20y looks around 10bp too high given the market’s pricing for short rates (R^2 of 83%). Being long 10y20y rolls negatively by 1.4bp over the first year, but does, of course, offer a long convexity exposure to compensate for this. A hedged spread using realized betas would be 1:1.08 DV01 of 10y20y: 2y1y.

 

 

For a non-linear payoff, look at mid-curve receivers on 10y20y as spread structures (or perhaps conditional curve trades vs short rates). The next chart shows the Fibonacci retracement levels for 10y20y, which gives us some idea of where to set breakeven points for receiver spread structures. Within the past six months the low has been in the 2.90% region, while further back the 2.60% level has been a strong support. The first retracement from current levels is around 3.00%, and would be target for a failure of 10y20y to breach the 100-month moving average.

 

 

This receiver ladder structure costs around 1.5bp running (mid indic):

Buy 90mm 1y10y20y receiver k=3.30%
Sell 90mm 1y10y20y receiver k=3.05%

Sell 90mm 1y10y20y receiver k=2.85%

(with Atmf = 3.33%)

 

The structure makes money with 10y20y at expiry from 3.285% to 2.615%, with the maximum P&L of 23.5bp between 3.05% and 2.85%. A break below the 2.615% level would start to incur losses. The trade is short gamma at inception, and slightly long the market.

 

On a shorter horizon with tighter strikes, this ladder costs 0.5bp running (mid indic)

Buy 90mm 6m10y20y receiver k=3.30%
Sell 90mm 6m10y20y receiver k=3.15%

Sell 90mm 6m10y20y receiver k=3.00%

(with Atmf = 3.34%)

and makes the largest P&L of 14.5 bp on a move to between 3.15% and 3%. The trade starts to lose money at 2.85% (a rally of 50bp in 10y20y over 6m).

 

Zero-cost 1x2 structures for comparison are (indicatively):
3m10y20y 3.30% / 3.15%, breakeven at 3%

6m10y20y 3.30% / 3.10%, breakeven at 2.90%

1y10y20y 3.30% / 3%, breakeven at 2.70%

 

Another way to approach the USD 10y20y is in comparison to the EUR 10y20y as in the chart below. The spread is pushing on its highest levels for some time and exceeded only by the period leading into the start of the ECB’s QE (and the substantial flattening of EUR 10y-30y): a situation unlikely to be repeated. Again, the simplest way is to receive USD 10y20y vs paying EUR 10y20y. Given the higher volatility of US rates (and the recent comatose price action in EUR 10y20y) this is essentially a proxy for receiving USD 10y20y outright.

 

 

There are many ways to skin a cat … if a different expression fits your needs better please let me know and we can investigate.

Best wishes,

 

Chris

 

 

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Quick oil chart : Oil has gone too far and should have a QUICK bounce from here.

We are now VERY over extended! The daily RSI is the lowest in 14 years, just as we hit 61.8% ret support at 55.36.

 

 

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• •             Astor Ridge does not provide independent research. We have no dedicated or paid strategists, research portals, or research subscriptions. However, you may receive unsolicited marketing communications from our Introducing Brokers from time to time, which may refer to specific trade recommendations. These recommendations are based solely on the opinion of the author, and are not official research recommendations of Astor Ridge.We have considered guidance from ESMA, and any written material from our Introducing Brokers that might fall within the scope of the rules will be provided for free, and made publicly available on our website, to any EU Investment firm that registers for it.
• •            
• •             If you are a MiFID firm and do not agree with our approach, and instead believe that you must pay for written commentary or trade recommendations, then Astor Ridge will accept  payments determined by    you.
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• •             I also direct you to our disclaimer on our email footer:
• •             This marketing was prepared by Christopher Williams, a consultant with Astor Ridge.  It is not appropriate to characterize this e-mail as independent investment research as referred to in MiFID and that it should be treated as a marketing communication even if it contains a trade recommendation. A history of marketing materials and research reports can be provided upon request in compliance with the European Commission’s Market Abuse Regulation.  Astor Ridge takes no proprietary trading risk, has no market making facilities, and has no position in any security we discuss in this e-mail.  The views in this e-mail are those of the author(s) and are subject to change, and Astor Ridge has no obligation to update its opinions or the information in this publication. If this e-mail contains opinions or recommendations, those opinions or recommendations reflect solely and exclusively those of the author, and such opinions were prepared independently of any other interests, including those of Astor Ridge and/or its affiliates. This publication does not constitute personal investment advice or take into account the individual financial circumstances or objectives of the those who receive it. The securities discussed herein may not be suitable for all investors. Astor Ridge recommends that investors independently evaluate each issuer, security or instrument discussed herein, and consult any independent advisors they believe necessary. The value of, and income from, any investment may fluctuate from day to day as a result of changes in relevant economic markets (including changes in market liquidity). The information herein is not intended to predict actual results, which may differ substantially from those reflected. Past performance is not necessarily indicative of future results. 
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• •             You should not use or disclose to any other person the contents of this e-mail or its attachments (if any), nor take copies. This e-mail is not a representation or warranty and is not intended nor should it be taken to create any legal relations, contractual or otherwise. This e-mail and any files transmitted with it are confidential, may be legally privileged, and are for the sole use of the intended recipient. Copyright in this e-mail and any accompanying document created by Astor Ridge LLP is owned by Astor Ridge LLP. 
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• •             If there is anything else you require from us to continue receiving our market communications, or prefer a different medium for access (e.g. publicly available password protected access on the Astor Ridge website), please do let me know.
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• •             Many thanks,
• •            
• •             Chris

 

 

 

 

MULTI ASSET UPDATE :  HIGH ALERT! This week continues to be about THE EURO AND STOCKS.** Some elements of the PERFECT storm are forming.

The EURO continues to remain SUB the all-important 1.1301 previous low is key. We are close to a MAJOR FREE FALL.

**Trade idea BUY Euro Dec 11100.00 puts @15 ticks, stop 1.1470 and ADD below 1.1301 NOW 13.

EM BONDS continue to do well and many USD crosses well on the way to major drops. One new EM bond contender is INDIA as the cross is topping. These views are NOW very much for the long-term, especially if US yields STALL.

EQUITIES ** THE WEEKS BIG WORRY** We CONTINUE to SIT on KEY levels and just about holding last month’s lows, A LOT to watch! Should last month’s lows be breached do expect us to emulate Octobers range.

**Trade idea BUY DAX DEC 11300-11200 put spread 33.0 ticks Stop above 117.00 and ADD sub 11400. NOW 33.**

CORE BONDS are the LEAST favoured market given the yields and inability for a fully functional market. Of late European markets have claimed MANY victims, it does feel we are void of market depth and position belief. The US remains a VERY short market and one aided by the latest yield POP, my argument is it won’t last if stocks break given the US back end appeal. ALSO ALL monthly and quarterly RSI’s remain steadfastly overbought. We may STALL if equities have that ONE LAST BOUNCE.

US CURVES continue to steepen in the back end and show little signs of giving up the BULL STEEPENER bias, that said this whole yield-curve directional view NEEDS discussion.

Positions :

**Buy US  2-30 entry 36.418 now 47.270**

**Buy US 10-30 entry 14.426 now 21.566**

 

 

ASTOR RIDGE : Independent Ideas, Research, Liquidity, Anonymity and Trusted Experience.

 

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• •             I provide our research notification below for your convenience:
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• •             Research Unbundling:
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• •             Astor Ridge does not provide independent research. We have no dedicated or paid strategists, research portals, or research subscriptions. However, you may receive unsolicited marketing communications from our Introducing Brokers from time to time, which may refer to specific trade recommendations. These recommendations are based solely on the opinion of the author, and are not official research recommendations of Astor Ridge.We have considered guidance from ESMA, and any written material from our Introducing Brokers that might fall within the scope of the rules will be provided for free, and made publicly available on our website, to any EU Investment firm that registers for it.
• •            
• •             If you are a MiFID firm and do not agree with our approach, and instead believe that you must pay for written commentary or trade recommendations, then Astor Ridge will accept  payments determined by    you.
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• •            
• •             I also direct you to our disclaimer on our email footer:
• •             This marketing was prepared by Christopher Williams, a consultant with Astor Ridge.  It is not appropriate to characterize this e-mail as independent investment research as referred to in MiFID and that it should be treated as a marketing communication even if it contains a trade recommendation. A history of marketing materials and research reports can be provided upon request in compliance with the European Commission’s Market Abuse Regulation.  Astor Ridge takes no proprietary trading risk, has no market making facilities, and has no position in any security we discuss in this e-mail.  The views in this e-mail are those of the author(s) and are subject to change, and Astor Ridge has no obligation to update its opinions or the information in this publication. If this e-mail contains opinions or recommendations, those opinions or recommendations reflect solely and exclusively those of the author, and such opinions were prepared independently of any other interests, including those of Astor Ridge and/or its affiliates. This publication does not constitute personal investment advice or take into account the individual financial circumstances or objectives of the those who receive it. The securities discussed herein may not be suitable for all investors. Astor Ridge recommends that investors independently evaluate each issuer, security or instrument discussed herein, and consult any independent advisors they believe necessary. The value of, and income from, any investment may fluctuate from day to day as a result of changes in relevant economic markets (including changes in market liquidity). The information herein is not intended to predict actual results, which may differ substantially from those reflected. Past performance is not necessarily indicative of future results. 
• •            
• •             You should not use or disclose to any other person the contents of this e-mail or its attachments (if any), nor take copies. This e-mail is not a representation or warranty and is not intended nor should it be taken to create any legal relations, contractual or otherwise. This e-mail and any files transmitted with it are confidential, may be legally privileged, and are for the sole use of the intended recipient. Copyright in this e-mail and any accompanying document created by Astor Ridge LLP is owned by Astor Ridge LLP. 
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• •            
• •             If there is anything else you require from us to continue receiving our market communications, or prefer a different medium for access (e.g. publicly available password protected access on the Astor Ridge website), please do let me know.
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• •             Otherwise, if you are more comfortable to deem consent by simply acknowledging receipt of this email, and continuing our trading relationship under our updated terms of business below, without registering your disapproval, we are happy to proceed on that basis.
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• •             Many thanks,
• •            
• •             Chris

 

 

 

 

• EURO : The all-important 1.1301 level has been breached and should now verify a STRAIGHT LINE DROP.
• 
• A close sub 1.1241 multi-year 50% ret will help a lot.
• 
• The DXY now has CLEAR AIR above it and will rally hard.
• 
• MANY USD-EM crosses now have SIZEABLE long-term tops formed. I think it is a combination of EM relief that the Turkey-Argentina situation is improving and the DXY losing momentum, more bias on the former for influence.

 

 

ASTOR RIDGE : Independent Ideas, Research, Liquidity, Anonymity and Trusted Experience.

 

• UK:         14-16 Dowgate Hill, London EC4R 2SU
• US:          245 Park Ave, 39^th Floor, NY, NY, 10167
• Office:   +44 (0) 203 143 4174
• Mobile:  +44 (0) 7980708683
• Email:     chris.williams@astorridge.com
• Web:       www.AstorRidge.com
•  
• •             I provide our research notification below for your convenience:
• •            
• •             Research Unbundling:
• •            
• •             Astor Ridge does not provide independent research. We have no dedicated or paid strategists, research portals, or research subscriptions. However, you may receive unsolicited marketing communications from our Introducing Brokers from time to time, which may refer to specific trade recommendations. These recommendations are based solely on the opinion of the author, and are not official research recommendations of Astor Ridge.We have considered guidance from ESMA, and any written material from our Introducing Brokers that might fall within the scope of the rules will be provided for free, and made publicly available on our website, to any EU Investment firm that registers for it.
• •            
• •             If you are a MiFID firm and do not agree with our approach, and instead believe that you must pay for written commentary or trade recommendations, then Astor Ridge will accept  payments determined by    you.
• •            
• •            
• •            
• •             I also direct you to our disclaimer on our email footer:
• •             This marketing was prepared by Christopher Williams, a consultant with Astor Ridge.  It is not appropriate to characterize this e-mail as independent investment research as referred to in MiFID and that it should be treated as a marketing communication even if it contains a trade recommendation. A history of marketing materials and research reports can be provided upon request in compliance with the European Commission’s Market Abuse Regulation.  Astor Ridge takes no proprietary trading risk, has no market making facilities, and has no position in any security we discuss in this e-mail.  The views in this e-mail are those of the author(s) and are subject to change, and Astor Ridge has no obligation to update its opinions or the information in this publication. If this e-mail contains opinions or recommendations, those opinions or recommendations reflect solely and exclusively those of the author, and such opinions were prepared independently of any other interests, including those of Astor Ridge and/or its affiliates. This publication does not constitute personal investment advice or take into account the individual financial circumstances or objectives of the those who receive it. The securities discussed herein may not be suitable for all investors. Astor Ridge recommends that investors independently evaluate each issuer, security or instrument discussed herein, and consult any independent advisors they believe necessary. The value of, and income from, any investment may fluctuate from day to day as a result of changes in relevant economic markets (including changes in market liquidity). The information herein is not intended to predict actual results, which may differ substantially from those reflected. Past performance is not necessarily indicative of future results. 
• •            
• •             You should not use or disclose to any other person the contents of this e-mail or its attachments (if any), nor take copies. This e-mail is not a representation or warranty and is not intended nor should it be taken to create any legal relations, contractual or otherwise. This e-mail and any files transmitted with it are confidential, may be legally privileged, and are for the sole use of the intended recipient. Copyright in this e-mail and any accompanying document created by Astor Ridge LLP is owned by Astor Ridge LLP. 
• •            
• •             Astor Ridge LLP is regulated by the Financial Conduct Authority (FCA):  Registration Number 579287
• •             Astor Ridge LLP is Registered in England and Wales with Companies House:  Registration Number OC372185
• •             Astor Ridge NA LLP is a member of FINRA/SIPC:  CRD Number 282626
• •             Astor Ridge NA LLP is a member of the National Futures Association (NFA):  Firm ID Number 0499303
• •             Astor Ridge NA LLP is Registered in England and Wales with Companies House:  Registration Number OC401796
• •            
• •            
• •             If there is anything else you require from us to continue receiving our market communications, or prefer a different medium for access (e.g. publicly available password protected access on the Astor Ridge website), please do let me know.
• •            
• •             Otherwise, if you are more comfortable to deem consent by simply acknowledging receipt of this email, and continuing our trading relationship under our updated terms of business below, without registering your disapproval, we are happy to proceed on that basis.
• •            
• •             Many thanks,
• •            
• •             Chris