Intraday Compression Arb Closes: Both Legs Profitable

Yesterday, in collaboration with Capital Context, upon observing the dramatic divergence between most assets and the 10 Year in the S&P warning aftermath, we noted the following "For those so inclined, an appropriate convergence trade would be a 2s10s30s neutral: essentially locking out for parallel curve shifts to moves in the ES, while trading the 10 Year spot for a compression trade with the ES, but keeping the wings of the butterfly constant as both the ES and the 10 Year is bought." Less than 24 hours later, the divergence has now collapsed for a 6.5 pts pick up ES, while the 10 Year leg also went in the expected direction by 3 bps. Trade now unwound.

Before (link):




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