UBS Fixed Income-Global Rates Strategy _SepDec Futures roll_ Cloherty-109894059(1)

ab16August2024GlobalResearchandEvidenceLabGlobalRatesStrategySep/DecFuturesrollReporiskismeaningfulforDecGiventheuncertainpathoftheFedoverthenextfewmonths,valuationoftheDeccontractswillbesensitivetochangesinpolicyexpectations.A25bpmoveintheexpectedRPratefromtodaytoDecdeliveryisworthbetween1.8and3.3ticksdependingonthecontract.TailswillbeuncertainTherearepossibleCTDswitchesinmanycontracts,creatinguncertaintyintheDV01ofeachcontract.Wesuggestinvestorstakecareofthebulkoftheirrollandcleanupthetailsafter.Growingassetmanagerlong/HFshortgrowthmakesusdoubtmorecrossmarginingDespitechatteraboutadditionalimprovementsincrossmargining,anumberofregulatorshavelongexpressedconcernaboutthesizeoftheHFbasistrade.Wethinkthatwilldampenanyfurtherchanges.WN:BuySep/SellDecWhiletheassetmanagerlongrollingforwardwillbemassive,wethinkDecunderpricesthewildcardsowepreferSep.US:BuySep/SellDecThereisahugeassetmanagerlong,butweexpectaggressiverollingfromshortsthatarelookingforthechanceofaCTDswitchtoprovideprotectioninaselloff.UXY:NeutralThereisachancethatthelargeassetmanagerlongrollingforwardwillrichenDec,butitseemsabitrichtoitsCTDalready.TY:SellSep/BuyDecTheassetmanagerlongshoulddominatethisroll.FV:SellSep/BuyDecTheassetmanagerlongisatnewhighs.TU:SellSep/BuyDecTheassetmanagerlongisatnewhighs.Thesecuritiesandfuturesproductsdescribedhereinmayno...