TechFlow news, October 4 — According to Jinshi, Morgan Stanley rate strategists led by ShaunZhou noted that U.S. Treasury options pricing indicates the U.S. government shutdown beginning October 1 will last at least 10 days and could extend up to 29 days. "Treasury futures options price in risk premiums around key economic data release dates," the strategists wrote in their report. While the final release dates for delayed economic indicators remain uncertain, the options market prices risk premiums across multiple future dates based on a probability distribution. This analysis is based on the price of one-day straddle options, which involve simultaneously buying or selling put and call options with the same strike price. The so-called breakeven point of a straddle represents the level of volatility required for buyers to profit. The report shows that the breakeven point on employment report release days tends to be about 5 basis points higher than on surrounding days. Assuming the September jobs report is released four business days after the end of the shutdown—as occurred in 2013—the market implies a significantly higher probability of a shutdown lasting 10–29 days compared to shorter or longer durations.
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