LOCKED MI2 Trader: Eurodollar Tail Hedge

Having been unapologetic inflationistas and fixed income bears for all of 2021, earlier this month, we explained that in Q2/Q3, the focus would shift from the US towards Europe and Japan (“MI2 Chart Point: BTP and Euribor Breakout” 2nd Feb). This was partly based on our belief that US headline CPI was close to a cyclical peak (“MI2 Chart Point: Headline CPI” 11th Jan). We were premature on that one! However, it didn’t alter the fact that our short Eurodollar and 5yr Treasury trades had essentially hit our targets. Risk rewards had significantly changed, and it was time to do some spring cleaning (“MI2 Trader: Auditing Market Views” 24th Jan).