BREXIT – What is Trading?

We may have skipped a day yesterday (prior commitments, sorry all!) but we can’t really ignore the price action this morning in GBP swaps. The BoE comments yesterday bringing rates lower this morning. Bye bye that 1.00% handle in ten years….

End of Day GBP Wrap-Up

  • 187 trades were reported to the SDRs.
  • Over £8bn in notional traded.
  • It was the largest day since the Referendum in terms of risk traded. £4.38m in DV01 went through the markets.

Looking back over the last ten days, we can see that Friday 1st July just sneaks into the lead – by £100k of DV01. Monday July 4th will be very quiet with the US out on holidays.

GBP DV01s July 1st
GBP DV01s traded for the past 10 days. Friday 1st July was the largest day since the referendum for the amount of risk traded.
GBP OIS Volumes
GBP OIS Volumes. Friday saw over £50bn in notional trade – showing similar elevated volumes to the IRS markets.
GBP IRS Closes
GBP IRS Closes. Not much change to the 15:06 entry below. 10 years closed at 0.967, well off the lows of the day. Only small volumes traded after 16:00 LON.

15:06 LON – GBP Swaps approaching the close

So I guess we are expecting a flurry of activity between 4pm and the close tonight as the US markets close positions? But it’s worth noting that we have already seen £7.5bn in notional and over £4m in DV01 trade today. That means today will be the largest day since the referendum in terms of trading volumes. So maybe a lot of that activity has already happened? Or the market has (somehow?) been truly wrong-footed and there is a lot of position squaring going on?

GBP Volumes 1511
GBP Volumes as at 15:11 LON. Very large volumes are the story of the day. Despite what looked like another large leg lower in Rates early this morning, prices have come back throughout the day.
GBP IRS 1506
Rates are not that different to the late trading yesterday – check out 5 years and 10 years which were trading late into the day yesterday. It’s not so much about the price moves today (although it was at one point with 10 years at 0.90%), but more about the large volumes.

12:20 LON – GBP Update

Okay, so I may have been a bit hasty in calling ten year swaps 10 basis points lower and impending QE on its’ way again. There appears to be more talk of rate cuts overnight in the UK. Really? I thought the preferred channel was QE? Either way, Rates have recovered from their early morning lows, with 10 years last trading at 0.952%, just 2 basis points below last night’s final trade:

GBP IRS 1220
GBP IRS Prices as at 12:20 LON

Volumes have continued to be impressive today, certainly running at higher levels than we’ve seen for the past couple of days. I guess with a long weekend coming up in the US, no (US-based) American will want to run any type of GBP risk over the long weekend. Who would with the political shenanigans going on right now? This means we’ve nearly had 100 trades already today, over £4.4bn in notional and nearly £2.5m in DV01.

GBP Volumes 1225
GBP IRS Volumes as at 12:20 LON. 5 year swaps have seen a LOT of volume today – suggesting the market’s focus is on rate cutting trades rather than QE-type trades.

10:07 LON – A Brexit Inbox and continued GBP Volumes

Brexit InboxOn days like this, it’s great to have the SDRView alerts hitting your inbox. It really helps stay on top of what is trading (see right).

We’ve now had almost £1bn trade across the curve, making up £600k of DV01. Ten years has recovered off it’s lows, and is back to 0.93%.

GBP Volumes 1010
GBP Volumes as at 10:10 LON


09:40 LON – What traded yesterday in GBP?

Yesterday was as good as any recent day to pause our live commentary. Volumes were down from the previous days, recording the lowest amount of risk reported to the SDRs since the referendum. Overall, we saw:

  • 117 trades reported to the SDRs
  • Nearly £6bn in notional
  • £2.3m in DV01 trade

In risk terms, the chart below puts this into perspective with recent days.

GBP Volumes DV01 30th
GBP Swap volumes in DV01 terms for the past ten days.

Considering ten year swaps closed lower on the day at 0.971%, some of the weekly moves we will record tonight – even since last Friday’s close, after the referendum – will be large. Amir might have to update his blog on margin tails yet again next week.

09:18 LON – GBP Trading in good size

We’ve had 21 trades so far this morning, totaling £508m. That is equivalent to £360k in DV01. 10y swaps have traded at 0.939, 0.901 and 0.909 in a total of £162m. All in response to this speech and, in particular, this statement by Mark Carney:

In my view, and I am not pre-judging the views of the other independent MPC members, the economic outlook has deteriorated and some monetary policy easing will likely be required over the summer.

Volumes and prices are below.

GBP IRS 0936
GBP IRS as at 09:36 LON. Ten year swaps are 10 basis points lower than last night.
GBP Volumes 0936
GBP Volumes as at 09:36 LON. Volumes are healthy as rates move significantly lower.

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