In January, we highlighted the inconsistency of US interest rate futures pricing and suggested shorting ED11s (“MI2 Trader: Eurodollars Timber?” 12th Jan). At the time, the logic seemed pretty straightforward: Ultra-accommodative monetary policy and multiple large fiscal packages. These, together with vaccination programs and perhaps the largest ever inventory cycle, seemed likely to unleash the greatest wave of aggregate demand since WWII. The icing on the cake was that it was set to run smack bang into bottlenecks in global supply chains, which would turbocharge the inflationary cycle, testing both markets and the Fed.
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