Mea culpa

I was mistaken about the curve effect of DV01 in 'Bonded Servitude'

My last post, “Bonded Servitude” contains an error. Originally I claimed “it has become clear there has been relatively more paying of fixed rates at the long-end of the curve since April.” This was wrong.

In fact, there has been relatively more receiving of fixed rates at longer maturities. The conclusion should have been that the curve steepening that has occurred since SVB went bankrupt faces an irregular headwind from swap end-users. I have changed the text to reflect this.

I made the mistake because I was too quick to jump to the conclusion that market forces were operating in the direction of my argument. The truth was more complicated and more interesting.