U.S. Treasurys market is ‘not well’ as ‘signs of illiquidity abound,’ B. of A. rates strategists say

Nov 15, 2021

Observations & Insight

The FIA has released its October volume numbers, reporting that Worldwide volume of exchange-traded derivatives was 5.54 billion contracts in the month of October, making it the third highest level recorded. The October total was down 1.7% from the previous month but up 37.2% from October 2020.

On a year-to-date basis, volume in the first 10 months of the year was 50.27 billion contracts, up 33.2% from the first 10 months of 2020. The majority of that increase came from equity index and individual equity contracts.

The FIA also noted a format change: “A new tab has been included in this report and will appear in all subsequent reports. The new tab, called Raw Data – Alternative, offers more detailed categorizations of individual contracts. Each contract now has four fields for categorization: group, category, sub-category and green status, which indicates whether or not a contract is an ESG index.”~SR


FIA Expo Video 2021: ICE Exec Says Pandemic Volatility Offers Lessons For Clearinghouses

The intense market volatility seen during the beginning of the global pandemic, particularly in April and May, underscored both the interconnectedness of the markets and the fact that not every participant is at the same level, said Chris Edmonds, global head of closing and risk at the Intercontinental Exchange, Inc.

In a video interview with John Lothian News at FIA Expo 2021 following a roundtable on operational efficiencies, Edmonds said it became clear during COVID-19 and the abrupt move to working at home that more efficient ways to share information sooner are needed. That would help ensure the reconciliation process, the amount of margin being paid on behalf of the client, is consistent with the amount of risk that the clearinghouse holds.

Watch the video »


Tesla Trade Spurs Early-Week Stock Selling; Inflation Index Jumps; Options Volume Continues to Set Records – The Spread – November 12, 2021

– Tesla CEO Elon Musk sells shares, briefly captivates the equity market; Higher inflation news chills Treasury trading; Options volume continues to set records;
– John’s Take profiles Stable, the winning innovator at FIA Expo 2021;
– EQDerivatives’ Russell Rhoads explains the Nasdaq-100 Volatility Index in the Term of the Week.

Watch the video »

Lead Stories

U.S. Treasurys market is ‘not well’ as ‘signs of illiquidity abound,’ B. of A. rates strategists say
Vivien Lou Chen – MarketWatch
Signs of trouble are cropping up in the world’s largest, most liquid government-securities market, B. of A. rates strategists say.
Large moves on very low volumes of Treasury inflation-protected securities, or TIPS, breakevens, a gauge of U.S. inflation expectations, are among the indications that the rates market is unsettled, the strategists say. “Collapsed” depth in the contract order book for 2-year Treasury futures and a 30-year auction last week, which Jefferies analysts described as “disastrous,” also are being cited as evidence of emerging problems.

The Stock Market Is Ignoring Reality. What to Know.
Jacob Sonenshine – Barron’s
Warning signs that the stock market is becoming detached from reality—or euphoric—are cropping up.
The S&P 500 has had quite a run. It’s up almost 9% since the Oct. 4 bottom of a pullback. That rally has been broad, not driven by just a few stocks, indicating markets are widely optimistic about future earnings and economic growth.

‘The Big Short’ investor Michael Burry sold most of his US stocks last quarter – but added 3 new holdings
Theron Mohamed – Markets Insider
Michael Burry took a knife to his stock portfolio in the third quarter, slashing it from more than 20 holdings to only six as of September 30, a Securities and Exchange Commission filing revealed on Monday. The sales align with his long-held expectation that the stock market is in a bubble and barreling towards a historic crash.

Inflation Surge Pushes Gold to Five-Month High
Hardika Singh – WSJ
A three-decade high in inflation has broken gold from its long 2021 rut, a sign investors are seeking greater protection from the prospect of lingering consumer-price increases.
Most-actively-traded gold futures just notched their best week in six months, rising 2.9% to $1,868.50 a troy ounce after data showed persistent supply shortages and strong consumer demand lifting prices at the fastest 12-month pace since 1990. That data spurred bets that inflation could linger longer than Federal Reserve officials expect, driving gains in assets including Treasury inflation-protected securities and gold.

India’s oil minister says volatility could hurt energy transition
Yousef Saba and Alex Lawler – Reuters
India’s oil minister said on Monday he was concerned about high oil prices, and price volatility could harm the world’s energy transition.

RBC’s Wu Silverman: Options Traders Fairly Bullish
Bloomberg (VIDEO)
RBC Capital Markets Managing Director and Equity Derivatives Strategist Amy Wu Silverman discusses the state of the derivatives market amid rising inflation risks. She speaks with Bloomberg’s Alix Steel and Guy Johnson on “Bloomberg Markets.”


Crypto trading puts pressure on bourses to open all hours
Eva Szalay – Financial Times
Nonstop trading in cryptocurrency markets is pushing traders of traditional assets towards working longer hours — in a reversal of pre-pandemic campaigns by banks and fund managers to shorten opening times for bourses.
Since March last year, Bitcoin and other digital assets have entered the professional investor world, with pension funds and conservative custody banks following family offices and hedge funds into the risky but fast-growing crypto market. Last month, Bank of America acknowledged that cryptocurrencies — now worth $2tn — had become too big to ignore.

VanEck Bitcoin futures ETF to launch on CBOE on Nov. 16
After years of efforts, VanEck is finally launching a Bitcoin exchange-traded fund based on BTC futures.
VanEck, one of the first United States-based asset managers to file for a Bitcoin (BTC) exchange-traded fund (ETF), is finally launching its Bitcoin futures ETF.
According to an official notice by the Chicago Board Options Exchange (CBOE), VanEck’s Bitcoin Strategy ETF will start trading on CBOE under the ticker symbol XBTF on Tuesday.

Micro E-mini Equity Index Futures and Options Surpass 1 Billion Contracts Traded
CME Group
CHICAGO, Nov. 15, 2021 /PRNewswire/ — CME Group, the world’s leading and most diverse derivatives marketplace, today announced that Micro E-mini Equity Index futures and options surpassed 1 billion contracts traded across all four indices on November 12.
Micro E-mini Equity Index futures became available for trading across four U.S. indices – S&P 500, Nasdaq-100, Russell 2000 and Dow Jones Industrial Average – in May of 2019, with Micro E-mini options available on Micro E-mini S&P 500 and Nasdaq-100 futures contracts in August of 2020.

A free version of the tracker with the daily top ten most traded stocks and ETFs by share of retail activity will be available on Nasdaq Data Link and Nasdaq.com.
Nasdaq has announced the launch of a new dataset that provides reliable information into the trading activity of self-directed retail investors in the U.S. equity market.

MIAX Exchange Group – Holiday Schedule – Thanksgiving 2021
Please be advised that the MIAX Exchanges will be closed on Thursday, November 25, 2021 in observance of the Thanksgiving Holiday.
On Friday, November 26, 2021, the MIAX Exchanges will have an abbreviated trading session. All Option Classes and Equity Issues will close 3 hours early.

Euronext announces its financial calendar for 2022
Amsterdam, Brussels, Dublin, Lisbon, Milan, Oslo and Paris – 12 November 2021 – Euronext, the leading pan-European exchange in the Eurozone, today announced its financial calendar for 2022, set as follows:


TradeZero Appoints Joshua Choi as Chief Financial Officer
NEW YORK, November 15, 2021–(BUSINESS WIRE)–TradeZero Holding Corp. (“TradeZero”) and its broker-dealer subsidiaries, which provide next-generation online trading platforms for active retail traders, today announced the appointment of Joshua Choi as Chief Financial Officer.

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The Spread

Market Volatility Not Over, Allspring’s Miletti Says

Lead Stories Market Volatility Not Over, Allspring's Miletti Says Bloomberg (Video) Ann Miletti, head of active equity at Allspring Global Investments, says the recent market rally has been healthy but the volatility isn't over yet. She speaks on "Bloomberg Markets:...

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