Denmark Central Bank Intervenes to Support Krone Peg Against Euro 
Taiwan Central Bank Likely to Keep Interest Rates Unchanged Through 2027 
BOJ Raises Interest Rates to 1% as Inflation Pressures Persist 
ECB Set to Raise Interest Rates as Energy Shock Fuels Eurozone Inflation Concerns 
RBA Expected to Hold Interest Rates at 4.35% as Markets Watch AUD/USD and ASX 200 
Elon Musk is remaking the world, like Henry Ford before him – but more dangerously 
In a rebuke to Trump, the Supreme Court rules that birthright citizenship is the law of the land 
South Korea Signals Possible Interest Rate Hike as Inflation Remains Elevated 
State of emergency in Crimea as Ukraine focuses pressure on ‘jewel in Putin’s crown’ 
BoE Policymaker Alan Taylor Signals No Need for Interest Rate Hike Amid Iran War Inflation Risks 
BOJ Rate Hike Expected to Boost Yen, Impact USD/JPY and Nikkei 
Although the Fed hiking is expected to drive price action, with a March hike now essentially priced in, speculation regarding the near-term pace of tightening is likely to take center stage.
Along those lines, our Treasury strategists note that though at this point the bar to pricing in four hikes this year is rather high, this week’s events evidence a committee uneasy with the risk of overshooting full employment and generating longer-run inflation risks.
At the same time, the underlying dynamics driving low terminal rates have not changed materially.
With the market likely to focus on the pace of rate hikes rather than the March meeting going forward, we move our long gamma bias to 5-year tails and our short gamma bias to 30s.
To estimate fair value for the tail curve, we consider the relative partial betas of daily changes in various swap rates with next meeting hike odds, the medium-term pace of hikes, and terminal Fed funds. Each represents the rough shape of the tail curve under the limiting case where just that component of policy expectations drives daily price action.
Buy $100mn 3Mx5Y ATMF straddles (notification date 6/5/2017, maturity date 6/7/2022, ATMF and strike @ 2.214%, premium 149c) versus selling $22mn 3Mx30Y ATMF straddles (notification date 6/5/2017, maturity date 6/7/2047, ATMF and strike @ 2.721%, premium 639c).
This trade requires frequent delta-hedging and is vega-neutral at inception.
