Monday, 30 March 2009

Bund back near top of range

Bunds are pushing to the top of its 123-124.50 range trading right now at 124.11, after failing to push further below 123. Bonds in general all shot up as stock markets around the world sold off, after auto maker plans got rejected. To be honest its about time, they put a hold on their printing presses as the government cant bail out the world. The stock drop was expected after such a sharp run up. Problems havent gone away, some pullback was expected, and i think we still have some way to go.
Whilst bunds are outperforming shorter dated bonds, Euribor spreads however are still rising. The Sep10-Dec10 euribor spread has shot up to a high of 29, I cant see it going much higher then that, and I am still willing to keep shorting it all the way up as I believe we will pullback a few ticks soon. Time will tell. I like trading the Mar11-Jun11 spread right now as its been ranging from 20-21 for a couple of days. Liquidity is low though, but if you can get filled, the range is very good to play, and is proving to be quite profitable at the moment.
The rest of the week should be very interesting, with ECB, Non Farm and G20. Lets just hope we don't get riots on the streets, cause that's the last thing we need.

Thursday, 26 March 2009

Bonds sell off as Euribor spreads continue to rise

As the market opened we saw bonds selling off, with the Bund hitting 122.60 in early trading. I was somewhat surprised to see the long end sell of in Euribors soo aggressively, with spreads moving upwards fast along the curve. In the Jun10-Sep10 spread, I went short the previous high of 22.5 to then see it go up to 23, then 23.5. I added a bit more at 23.5 before managed to be small up on the pullback. Further down the curve the Dec10-Mar11 spread initially fell, to 18s from 19s before then going up to 20s. Longer end euribors sold off much more relative to front months as the market is expecting the ECB to continue cutting rates in the short term.
Bonds actually reversed as the day went on, and continued its disconnect with equities as the Bund finished close to the high of the day along with equities.
Tech shares fueled the gains for stocks, with the Nasdaq now flat for 2009. GM paced the Dow Jones with a 14% rise. Apparently they are likely to be given another life line, in my opinion the whole structure and management have to change to change the fortunes for GM. We are in a changing world, and they have been one of the slowest to react to the change, i'll be surpised if they manage the turn around, but we can hope!
Have Stocks risen too far too fast? Well with GDP US final at -6.3% and no real signs of things improving, even though they haven't got any worse, its hard not to see another shot to the downside.

Wednesday, 25 March 2009

Stocks trading wildly.

A relatively quiet day in the bond market compared to recent days. Bunds bounced between positive and negative territory the whole day before settling at 122.88. It wouldn't be surprising if we got some consolidation before we start making the next move.
Euribor spreads held well today, staying nicely in a range for most of the day. I still kept my bias to the short side, shorting along the curve as we remained at short term highs along the red and green month spreads. Going forward I wouldn't expect any big moves in the spreads until we come closer to the ECB rate decision next Thursday and the American job numbers, which will be the latest indication on where we stand.
Stocks had a wild day today, the Dow opened up higher before turning south throughout the day, before shooting up over 200 points towards the close. Such volatility normally is a bearish sign. Financials were the main push towards the close of the session with some wild swings in the big names towards the close. The XLF(financial index) rose almsot 10% in the last hour of trading. This type of action isn't to surprising at this moment as we have those taking profits from the huge run up, and those wanting to initiate positions feeling it is a good pullback to get in. Only time will tell, I still favour downside. Below is a chart of the XLF showing the big intraday reversal from lows.

Tuesday, 24 March 2009

Short Sterling sells off

Inflation in the UK was surprisingly stronger then expected. That ruffled the feathers a bit as we sold off in the short sterling contracts and gave sterling currency some much needed strength. Short sterling like Euribors have seen its calendar spreads go steadily upwards for the last week.
Euribor spreads saw new short term highs, Jun10-Sep10 hit 22s before coming off slightly, Dec10-Mar11 touched high of 19, and Mar11-Jun11 reached high of 21.5. I was shorting it all the way up, which worked to an extent cause there has been pullbacks before next leg higher. That will remain my strategy if we continue higher.
Bunds as expected dropped even further touching the 123 level. From here I would expect a further run down to the 121.5 level where we have had previous support. If that pans out we would have a perfect head and shoulders pattern. If we were to go the other way we could establish a range between 124.5 and 123.

Monday, 23 March 2009

Dow Jones rallies over 6%

As the bank plan got announced stocks rallied BIG time as investors are jumping on the ship snapping up financials. Big names like Citi and Bank of America where up 20% or more, in fact pretty much everything was up, great day to be long.
The bund headed lower as it couldn't cleanly breach 124.50 and now is trading 124.07. The shoulder has been set in place for the formation and we could see 123 as our next stop.
Euribors were extremely quiet today volume wise. Low interest from the start made trading difficult today with the lack of liquidity making it hard to get filled. I tended to short recent highs in the spreads which barely held, but wasn't able to get much size on. A day to mark of the cards really. We might see some follow through on bonds tomorrow after this massive stock rally. I personally hope we really do as the spreads are becoming very difficult to trade.
Personally long term, I feel that we might still test the lows again in stocks, maybe be not soon, but come the end of the year. All this trillions in spending has got to catch up with us at some point.

Saturday, 21 March 2009

Euribor spreads continue higher

With the expiration of equity index futures there was some expected expiration volatility in the equity markets. Stocks headed down in the US after expected profit taking after such a big run up, with financial shares getting battered from highs reached yesterday.
Bund made early attempts to breach 124.50 area and breached the level in the afternoon as stock started coming off and buying pressure remained from the fed injection on Wednesday.
Euribors were bid the whole day with Ecb members comments regarding rates. As the expectations for a rate cut continues, spreads along the curve were going higher. We reached 21s in the jun10-sep10 spread after retracing to 20s in early morning, the sep10 dec10 spread reached 25s after trading at 23s in the morning. This trend is likely to continue in the medium term as things continue to look bad in the economy as a whole.
Long term I still favour the downside for the bund unless we breach 125s, then I think we could return to the 126 area.
Have a nice weekend

Thursday, 19 March 2009

Bund trading

After the massive move up in the Bund yesterday, today's volatility didn't disappoint. As mentioned yesterday 124.50 proved to be a sticky point and of the open we came of 40 ticks before settling at the end of the day 123.79. The real story was the divergence between the Schatz and the Bund. Over previous session the bund has been particularly weak relative to the short end which is to be expected but today the schatz was pretty much unchanged where as the Bund was up over 150 ticks reversing the move up in Schatz/Bobl and Bobl/Bund spreads over the past few weeks.
Seeing this correction I tended to favour short position across the Euribor curve, which turned out to be the wrong play as white months were much more bid during the day. I spent the whole day averaging and managed to salvage the position as late on the spreads pulled back a bit.
Volume was good through out, with the euribors trading above 100k in front months, bund traded over 1 million contracts, just like the old days.
Looking forward, I still favour the bund to the downside despite the recent action by the fed, and in terms of euribor spreads, I would be looking to go long on any pullback as it looks increasingly likely the ECB will keep on cutting.

Wednesday, 18 March 2009

fed Injects 1 trillion!

Stock swung from negative to positive after the news that the fed is going to inject 1 trillion into buying long dated bonds. Treasuries flew up on the news as did the bund. The bund almost reached 122 flat, getting as low as 122.11, then consolidating at around the 40 level until the news came out from which it shot up almost 200 ticks, sending spreads lower.
Earlier in the day the euribor spreads did push up from yesterdays drop, and held steady through out the day. The front month spreads remained more bid then the back month spreads which had a lot more weight on them.
Short sterling spreads all went higher moving two ticks higher from the opening.
Tomorrow will be interesting for calendars as we shall see how they will react of this fed move. I will be looking to short more then long, but see what opportunities present it self.
For the bund 124.50 could be a sticky area for the bund, as we may be forming a head and shoulders formation, long term I could still see us retesting 122s.
Its likely to be a volatile day tomorrow for sure, should be ripe with opportunities.
On a side note, I think these bonuses to the AIG execs is a complete outrage. If these execs got millions in bonuses for losing the firm billions, the question has to be asked why didn't Jerome Kerviel get a bonus for losing socgen billions! Surely he deserved a few million! What an unfair world we live in?

Tuesday, 17 March 2009

technology in focus

The rally continued in stocks today led by technology. We rallied over 4% in the nasdaq, with it coming back from its pounding yesterday. This in turn with financials and real estate propped the markets higher once more giving us 10% plus bounce in the last week and a half.
With this reversion back to stocks, bonds sold of across the board led by bunds which made their way to the 122 area, closing at 122.48. I think we still have some downside to go and we may consolidate or bounce of the 121 handle.
Euribors followed the schatz lower as the short end felt the heat this session. Action was quite volatile as low volume exaggerated moves.
We sold of across the curve and we sold of in the euribor calendars from Sep10 spreads onwards.
Tomorrow i'm going to be looking for the rebound in the spreads, going long if the opportunity presents its self but will wait in the morning to see if there is any further downside or not.
Stock wise I am considering entering UYG ETF on any pull back as I feel we can get another 10 - 15% pop in financials.
We shall see how it pans out.

Monday, 16 March 2009

Did you see AIG

Very busy day today, as we had the initial spike in equities, we had the bund sell of again. It was another long end sell of relative the 2 year schatz as people getting out of fixed income and back into equities. We are reaching the 123.00 support in the bund, a break beyond that could see us quickly reach 122, and then to test 121. If we bounce we could head back near the 126 area.
Euribors have come of today along with the general market as we reached resistance 98.06 on the Jun 10 euribor, looking tomorrow for a move to 98 flat. Spreads all held in line which was a pretty uneventful day for spreads.
The main action today was in equities where we saw a massive spike in AIG, for what reason I still don't know, but my guess would be a massive short covering accompanied by stops being triggered on the upside. We say AIG go up from 60 cents to 1 dollar in a matter of minutes. HUGE MOVE before retracing slightly.
The same went for the rest of the market, where we came off the highs for the DOW as the inevitable profit taking came in after such a big rebound. I do belive we will rally a bit more before eventually testing lows again. I think the run up in Citi could be coming to exhaustion soon and may be ripe for a short in the 3 dollar area.
We shall see how it pans out.

Saturday, 14 March 2009

Best week for equities

We finished up for stocks on the week, best since November 2008. But both these rallies have proceeded unpresidented market hammering's, so it was to be expected really.
Bund sold of heavily on Friday initially after week auction results, while volume is still relatively light which added to the exaggerated move, it was still a big move and caught a few stops along the way.
Euribors were pretty active today, volume was concentrated around the front months with red and green month liquidity very low. This made trading difficult in these far end months.
Personally had a difficult day, couldn't get into the groove but managed to eke out a small profit. Next week will be interesting, with the feds decision on Tuesday. Its likely they wont do much but their wordings will be the thing to look out for.
Have a nice weekend!

Thursday, 12 March 2009

We got a little rally going

10% rise in the dow over the last few days, well it was to be expected after the battering its received over the last few weeks. Any good news is market moving news at the moment, with a good bank of America statement and slightly better data giving a positive tone to the session.
As far as the bond markets go, we went higher today, with the UK gilts still outperforming bunds with the Gilt repurchase program. All eyes still on how much further the Ecb will go, the US and Uk have pretty much reached a floor, but Ecb still have more room. But they have always been more conservative, and in my opinion they desperately dont want rates to go to the levels of the UK or US. They keep going on about price stability and all that rubbish and not addressing the real issues which is an economy in total ruins. But I guess time will only tell who was right.

Euribor spreads were slightly on the rise today, with front Mar10-Jun10 moving from 16s to 17s. There was good volume in the STIR today, but schatz and bund volumes continue to be significantly lower then a year ago. Alot of big players out of the game? Reduced exposure? Anyone's guess.

Tomorrow expecting the same type of day. Relatively calm with good opportunities.

Wednesday, 11 March 2009

Calmer days

Today was a calmer day with the euribor outright and calendars, volume was roughly half what it was yesterday. But the big trade of the day was the selling of bund relative to the gilt. While Gilts were small down bund was down over 70 points, another long end sell off in the european curve. This was due to the bank of England launched its gilt repurchase programme.
I tended to play the range today, in what was a quiet day, in short sterling however we had an up trend in the calendars, and got caught slightly trying to sell it. We were pushing higher in jun10 and sep 10 relative to dec10 which was lagging which I was hoping would come back, but not today, we see how it will pan out tomorrow.

Happy trading

Tuesday, 10 March 2009

Volatile Day

We had some good volatility today in euribors. The whole curve was pretty flat but after an initial sell of in the morning we rallied to highs then came off as equity markets made a strong start. Whether this rally in stocks is just a dead cat bounce remains to be seen.
The calendar spreads were very well behaved pretty much trading in line the whole day. The Mar10-Jun10 spreads moved from 17.5 in the morning to a low of 15s, but ranged well and was nothing to alarming.
We had good volume to with over 100,000 contracts trading in many of the front to red months.
Longer dated bonds sold off quite heavily relative to near end. With the bund down 70 ticks as I write and schatz down 10 ticks. Its a reversal of yesterdays trends where the front end of the curve sold of heavily relative to the back.
My bias is buy these calendars as we go lower, they have retraced quite a bit from its highs and personally I feel we still have a bit of a way to go.

Ecb member Webber said that rates can go to zero if the situation demanded it. Ive heard so much contradiction from these members that I have started to not pay any attention to them, I guess they are just trying to stir up some volatility.

Stocks still rising as I finish writing, Eurostoxx up over 5%, gaining traction from earlier citigroup comments.

Rajen
Do you have your own world-wide-web yet?

Monday, 9 March 2009

A new begining 09/03/09

Ive been trading euribor calendars for 2 years and before used to trade the TED spread. Im going to be blogging my daily market experiances during these very volatile times.
Ive decided to do this because ive found it very hard to get some insight into the european bond markets with most of the emphasis placed on the stock market which at this current moment is a nightmare.
So stay tuned....

Rajen

Do you have your own world-wide-web yet?

Short Sterling spreads nudge higher on hawkish Fed; Walmart blowout

As most must know trading Short Sterling is a bit of a bore, and has been for a while. Having managed to get out of my 2 month hold before,...