Financial market analysis prices and volatility

Find weekly our studies and decryptions on the evolution of prices and volatility of bond markets, foreign exchange and equity indices.

Update : 09/25/2023 - 02:45 am GMT
Memento
US US Bond Market

The US bond market continues to display an inverted yield curve that is flattening slightly due to rising mid- and long-term rates. For the short term part, after the inertia of the Fed, there has been no significant movement despite the risk of a paralysis of the administration which will not affect the debt ceiling, but only the official who signs the checks. Bill's latest one-month issue was partly subscribed to by investors accepting a yield 10 basis points below the RRP. We are far from a repeat of April, but there is nevertheless an increased need for collateral. This week, the US Treasury will fill this need for collateral and drain liquidity out of the RRP and the market by issuing a series of bonds of all maturities.
On the long maturities side, sales of 10 and 30 year securities, probably motivated by the cost of access to the dollar, remained strong, and other opportunistic operations, such as sales of futures, probably amplified the movement. The status quo on key rates and the closure of several foreign markets should ease the downward pressure on bonds. Given the level of the premium, the speed of evolution of futures T-Note could be monitored like milk on the fire !

Interest rate futures anticipate a fall in rates by the start of the second quarter of 2024.

The brief resurgence of short-term volatility (HV) does not challenge the long-term downward trend of volatility (HV), but this short-term volatility spike leads to more significant fluctuations. Short-term volatility (HV) for the 2 and 5-year maturities has stabilized, while that of longer maturities has slightly increased (bonus for the 30-year).

On the spread front, in the evolution of spreads, the weight of long maturities outweighs that of short maturities.
- A 10-year vs. 3-month spread with decreasing volatility (HV) and having benefited from the disruptions on 10-year bonds, should find a ceiling below the level of -99 / -88 basis points.
- A 10 vs. 2 year spread, with volatility (HV) recovering modestly, should find a ceiling at -64 basis points to return to around -71 basis points.
EUEuropean bond market

A European bond market less volatile than the American market, with medium and long-term rates up slightly. The German and French curves, still inverted, have flattened slightly due to the more rapid rise in median and long-term rates. The rise in rates also affected the Italian curve, which remains inclined, with a more marked increase in its long-term rates.
The spreads between the 10-year and 2-year rates of the major countries (Germany, France) are in a recessionary configuration.
European rate futures anticipate a cut in key rates for the start of the second half of 2024.

The long-term volatility (HV) of the EU bond market continues to decline, while the short-term volatility temporarily stagnates. Within the EU, the decline is faster in the German bond market, followed by the French market, unlike that of Italy.

  • The main EU 10-year bonds against the German 10-year bond are on an upward trend.

EURUSDEURUSD parity

The euro remains weak against the dollar despite a US vs. EU monetary rate differential that continues to narrow, which perhaps justifies the alert on this parity. At the end of the week, the closure of markets in the Middle East and Asia should ease the bullish pressure on the dollar. The Yen near 150 against the dollar will continue to Polarize attention.

WorldEquity Indices

Stock indices "heavy". The liquidity drains, the next week a potential "showdown" in US, along with issues related to the dollar, will continue to exert a negative pressure on the stock markets. The brief recovery in short-term volatility (HV) will not call into question the persistent decline in long-term volatility (HV), but it does induce significant fluctuations within the indices.

USUS 10 year government at 4.435

Taux 10 ans USA

Pression Acheteur Pression Vendeur

Fundamental trend : Technical recovery

The predominant buying pressure decreases by accelerating its speed, the selling pressure decreases by slowing its speed.

For this week, the US 10-year should find a ceiling in its resistance zone 4.510 / 4.529 before returning towards its supports by testing the first zone of 4.366 / 4.336.

Resistances 4.442 4.450 4.467 4.480 4.498 4.510 4.529 4.547 4.575 4.587 4.609 4.630 4.660 4.670 4.684 4.690 4.720 4.751 4.765 4.775
Supports 4.400 4.366 4.336 4.322 4.300 4.272 4.265 4.245 4.232 4.204 4.192 4.170 4.161 4.132 4.120 4.112 4.100 4.089 4.078 4.049
Volatility HV * 21 D. 252 D. LTV
Average range * Day 0.086 Weekly 0.189
Max. weekly range * 4.246 4.624

* Anticipated

GermanGerman 10 year government at 2.742

German 10 year government

Buyer PressureSeller Pressure

Fundamental trend : Technical recovery

The predominant buying pressure declines at a regular rhythm, the selling pressure decreases by slowing its speed.

For this week, the German 10-year should find a ceiling in its resistance zone 2.784 / 2.793 before returning towards its support zones by testing the first 2.705 / 2.691.

Resistances 2.774 2.784 2.793 2.804 2.825 2.849 2.886 2.901 2.921 2.944 2.969 2.991 3.009 3.025 3.050 3.092 3.101 3.119 3.164 3.173
Supports 2.734 2.727 2.705 2.691 2.668 2.625 2.597 2.573 2.560 2.536 2.511 2.499 2.436 2.423 2.404 2.381 2.372 2.355 2.323 2.296
Volatility HV * 21 D. 252 D. LTV
Average range * Day 0.085 Weekly 0.147
Max. weekly range * 2.595 2.889

* Anticipated

FrenchFrench 10 year government at 3.279

French 10 year government

Buyer PressureSeller Pressure

Fundamental trend : Technical recovery

The predominant buying pressure slowly decreases, the selling pressure decreases by slowing down its speed.

This week, the French 10-year should find a ceiling in its resistance zone 3.324 / 3.339 before returning towards its support zones by testing the first 3.168 / 3.153.

Resistances 3.280 3.315 3.324 3.339 3.353 3.361 3.374 3.411 3.420 3.435 3.469 3.514 3.523 3.542 3.553 3.576 3.604 3.628 3.644 3.671
Supports 3.257 3.234 3.215 3.194 3.172 3.168 3.153 3.141 3.138 3.121 3.113 3.096 3.084 3.077 3.056 3.047 3.029 3.010 2.958 2.951
Volatility HV * 21 D. 252 D. LTV
Average range * Day 0.088 Weekly 0.132
Max. weekly range * 3.147 3.411

* Anticipated

EuropeEURUSD at 1.0645

Euro vs Dollar

Buyer PressureSeller Pressure

Fundamental trend : Consolidation

The buying pressure decreases at a regular rhythm, the predominant selling pressure decreases by accelerating its speed.

For this week, the single currency should break its resistance level 1.0650 / 1.0667 to find a ceiling below its zone 1.0748 / 1.0759. Its bearish movements should be limited to its support zone 1.0615 / 1.0605

Resistances 1.0650 1.0667 1.0680 1.0695 1.0710 1.0717 1.0726 1.0748 1.0759 1.0764 1.0779 1.0791
Supports 1.0637 1.0615 1.0579 1.0560 1.0550 1.0544 1.0537 1.0525 1.0515 1.0497 1.0493
Volatility HV * 21 D. 252 D. LTV
Average range * Day 0.0067 Weekly 0.0141
Max. weekly range * 1.0504 1.0786
* Anticipated

USSP500 at 4320

SP500 Index

Buyer PressureSeller Pressure

Fundamental trend : Technical recovery

The buying pressure is declining at a sustained pace, the predominant selling pressure is stagnating.

For this week, the index should permanently break the support zone 4328 / 4316 to reach the level 4268 / 4259. The bullish movements should be limited to the resistance zone 4360 / 4366.

Resistances 4328 4339 4353 4360 4366 4375 4385 4393 4411 4422 4429 4437
Supports 4316 4301 4286 4278 4268 4259 4248 4236 4226 4214 4196
Volatility HV * 21 D. 252 D. LTV
Average range * Day 45 Pts Weekly 125 Pts
Max. weekly range * 4195 4445
* Anticipated
IMPLIED VOLATILITY SP500 OPTIONS

Over 1 week, variation of the centered volatility (monthly maturities)

SPX 10/20/2023 11/17/2023 SP P/C
IV 15.08 ( + 3.28 pts) 15.16 ( + 2.91 pts)
CALL 15.09 ( + 3.41 pts) 15.17 ( + 3.22 pts)
PUT 15.07 ( + 3.15 pts) 15.15 ( + 2.60 pts)
SP P/C - 0.02 ( - 0.26 pts) - 0.02 ( - 0.63 pts)
SPX Smile July
Smile October
SPX Smile August
Smile November
SPX Smile July & August
Smile October & November

From one week to the next, volatility (IV) centered (SPX, SPY) increased for both maturities, with a slight advantage in terms of momentum for the October maturity (SPX, SPY). In comparison to the VIX index, the rise in volatility was more moderate for the November maturity (SPX, SPY). The put vs. call volatility spread (SPX) remains stuck to the pair for both maturities. The SPY calls continue to have a higher cost than SPX calls, unlike puts.
The October smile flattened slightly with a faster rise in centered volatility and that of OTM puts. In November, the rise in OTM puts was more modest. For OTM calls of both maturities, the rise in volatility was slower than the rise in centred volatility.

The regular purchase of very OTM puts only harms the seller.

VIX INDEX at 17.20
  • Pressure
  • VIX - HV
VIX HV SP500 / HV UST - Weekly
VIX HV SP500 / HV UST - Daily