Insights 
VT 
Bessent expressed confidence that the US will see GDP growth surpassing its deficit increase. He voiced scepticism towards the CBO’s growth estimates.
The timing for the tax bill vote is anticipated to occur at 1:30 PM, as mentioned during a CNBC appearance.
Economic Growth Versus Government Debt
Bessent believes economic growth in the US is likely to outpace the rise in government debt. He doesn’t fully trust the Congressional Budget Office’s forecast, suggesting their outlook may be too pessimistic or based on assumptions he sees as unlikely.
He mentioned that the vote on the tax bill is expected in the early afternoon. This may affect both rates and equity prices depending on the market’s view of its long-term budgetary effects and growth implications.
We observe that this moment bears direct meaning for those active in rate-sensitive products, especially where volatility has been compressing over the past fortnight. Rates markets are currently attempting to price in the scale and permanence of any potential fiscal stimulus, so short-dated contracts are likely the first area of focus. While longer tenors have absorbed some move, the balance of skew still implies market participants may be preparing for front-loaded surprises.
Yields have continued drifting, led less by systematic flow and more by traders manually reducing hedges, particularly around 2y and 5y instruments. It’s not a sharp repositioning, but more of a slow return to neutral after weeks of uncertainty. That is worth watching, especially if the bill passes with amendments that could push headline figures higher than previously assumed.
Market Positioning and Reactions
From our perspective, the skew in rate vols has become quite one-sided, and it’s been this way largely since Monday. Dispersion trades that target this asymmetry are already seeing thinner offers. What’s more, cross-asset desks have started to reprice volatilities in response to the fiscal theme re-emerging, which suggests equity-linked hedging products could bleed into the rates space.
Sterling products remain mostly detached, but that may change quickly. A clear steer on American policy tends to shift EUR and GBP vols in turn, mainly due to CTA basket rebalancing. So, traders exposed through synthetic curves or steepener strategies may wish to consider what a 20–30bps wholesale shift in US bias would mean for them.
As the vote nears, implieds in front contracts have moved roughly 1.5 vols higher since yesterday, indicating rising demand for protection or event-driven participation. We would expect any further increase beyond that to inspire calendar spreads among larger macro names.
Our activity this week has been mostly concentrated around the belly of the curve, where implied/realised divergence is offering more clean entries. There’s no widespread panic, but there is a firm bid for gamma, especially on swaption hedges. That’s telling — real money may not be ready to take big directional positions, but they’re evidently unwilling to be caught flat.
Bessent’s remarks, along with the schedule for the vote, suggest upcoming short bursts of movement rather than a full-blown trend. Directional trades may find more consistent traction in the aftermath. For now, short expiry options offer clearer reward-risk paths, especially as intraday volatility spikes tend to revert before the day ends. With skew already priced in and gamma bid, low delta exposure may be the better bet for flexibility.
