Wednesday, 28 March 2012

Bonds Retrace

After the huge sell off in bonds we have got some significant retracemnt with the Bund close to touching 138 again. So much for that, spreads have come off as you would expect but are still not where they were pre sell off. However there is more of a range in these Bors which is good, although Volume has been getting worse. Although it was dangerous shorting the spreads finally paid off, but I think here we have to be careful, we are in the middle of the whole move on many of the 3 month spreads, so trying to look at the Bund and the 2s 10s spread to give guidance as to which way the spreads mite go.
The week in general however has been pretty quiet so not much else to report.Hopefully we get some more volume again next week!

Tuesday, 20 March 2012

WorldSpreads 13 million Blackhole

So another firm doing some client money swindling. Apparently a 13million black hold in the accounts of world spreads out of a pool of almost 30 million. This mind you is another FSA regulated firm. So it begs the question, what does FSA regulated really mean? Well it means whether you with a dodgy broker in some offshore island, or a FSA regulated UK company, your money is not safe, and no guarantees can be made that you will see it all when you want it back. If this news isn't bad enough, the news that KPMG has been appointed auditors is a double whammy and it is likely that they will not see there money for months.

Below is the full article from the independent:

Customers of a spread betting firm are likely to be left seeking compensation after an estimated £13 million black hole in its accounts was revealed today.

WorldSpreads, which runs online and telephone trading services, was placed into administration over the weekend after "accounting irregularities" were found.

Administrators at KPMG said the group's 15,000 customers were owed £29.7 million but the group has only £16.6 million of cash, leaving them facing a large shortfall.

However, customers may be reimbursed up to £50,000 by the industry's Financial Services Compensation Scheme, depending on their circumstances.

On Wednesday, chief executive and co-founder Conor Foley resigned, two weeks after chief financial officer Niall O'Kelly stepped down following a profits warning.

Its shares were suspended from trading on the Alternative Investment Market on Friday.

Redundancies among the firm's 66 staff - most of whom are based in London - are likely as administrators wind down the business. WorldSpreads is based in London and its parent company is in Dublin.

The Financial Times reported that WorldSpreads mixed money from customers' accounts, which should have been segregated, with its own funds.

The industry's compensation scheme pays up to £50,000, mainly for individuals and small firms. But some of its clients, including other spread betting firms, are believed to be owed larger sums, raising the prospect of a lengthy legal struggle.

The Financial Services Authority said: "Clients should be aware that any shortfall in the client money accounts will impact the amount of money that can be returned."

Friday, 16 March 2012

Bond Yield Curves Steepen

What a big week for the bond markets, as we have sold of close to 400 ticks in the Bund, moved up big in the 2s 10s spreads, and have seen big moves up in the Euribor spreads as well as other STIR spreads. Is the market getting a bit ahead of it self? In my opinion yes, but that doesn't change what's happening right now, and my strategy to keep shorting into the rising spreads is proving to be alot of hard work.But this is generally the correct strategy so will continue doing it and scratching if need be.
Going forward, its likely that we are going to keep going up in stocks, as there doesn't seem much in its way, and bonds are likely to stay lower for now, with yields jumping way above 2%, as long as data keeps coming in strong.
Below is some video analysis of the weeks moves:

Wednesday, 14 March 2012

Mad Euribor open

Who ever trades the short end would have seen today the mental open in the Euribor. We opened up and had 9k lots push the euribor down 10 prices in one swoop before it retraced. Ended up being a brutal day for me as I got filled all my longs and had to scramble to spread it all up at very bad prices. Ended up short over 60 lots and managed to reduce the loss to 1/2 tick which wasn't as bad considering I was down over 2 fat ticks at one point. The reason I presume is some repositioning or dumping of positions after the more upbeat FOMC statement yesterday.
As bad as it was maybe this could be the start of some volatility in the Short end. Volumes are way up almost 4 times more then usual at this time of the day.
We seem to have stabilised now but will be watching closely which way these spreads go when the US opens, I still favour shorts, because regardless of the more upbeat statement there is no sign of rate rises in the short to medium term so think these spreads will come back down again.
We may also get more ensuing volatility from the futures and options expiries this week so bear this in mind.

Friday, 9 March 2012

Summary of the Week- Euribor spreads retrace

In a week again dictated by what will be the take up in the Greek debt swap deal, and Greece something or another we seen the lofty spread prices of the previous weeks in the Euribor contracts come back down again. Last week I was shorting every spread especially in the back months, most notably Sep13-Dec13 and Dec13 Mar 14, as they kept going higher. In the later spread I was averaged in from 9s up to 10.5s, and didn't have the bottle to hold on to where I knew they were eventually going which was back down to the previous range. Its always easier as we all know to say something is going to happen, but with the pain of seeing the spread seem somewhat on a big break up to the upside, any sign of profit makes us want to get out after seeing the red. Also it took 7 days or so for it to come back down and being a day trader, it wasn't in my trading plan to hold it that long, although it does look like that's the new way forward in the current conditions.

Either way came out with small profit and now im looking to buy the spreads again. Disappointingly the ECB press conference yesterday didnt really provide much opportunity after the first small sell of in the Bors, but with Non farm payroll being released in just over an hour, an out of line number might spice things up a bit.
Im looking to go long 7/7.5s sep13 dec13, on the back month, in the front months looking an opportunity to go long 4.5/5s in Jun13/Sep13, short 6s-6.5.

Elsewhere with the Bund having rolled over, I am favouring longs back towards the 140 level in the jun12 contract, although a good Non Farm payroll could make me rethink that view.

Equities seem to be a buy still as returns elsewhere are very low, hence making it the best value out there.
Hopefully we have some movement of this NFP, good luck!

Thursday, 1 March 2012

Post 3 Year LTRO moves

With the Greek bailout approved and the 2nd and final 3 year LTRO out the way, we started to see some volume coming back into the short end especially. Although trading was difficult as the short end spreads where going upwards with no real pull back. I tended to short every 3 month spread in the Euribor and Short sterling contracts, and over the course of yesterday and today kept averaging till I ended small up, doing 400 odd round trips over the two days, which didn't really help the cause. Despite not being able to hold on to all of the spreads I do still think we will come back off as there is no real reason for it to continue going higher.
The Bund tested 140s 3 times, and all three times ended up being good sells, with going long the shatz Bund spread when the Bund is in the 40s being the slightly safer option. I mis timed the first one and the second time was a great bounce of a level a couple of months back which I didn't get into sadly.
Hoping for some real action now going forward.
For further info on this spread watch below:

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,...