Thursday, 19 April 2012

Bunds posts another new high

Bunds posted new all time highs as worries over Spain led to more safe haven buying. Bunds reached a high of 140.79, and in turn the 2s 10s spread reached another low, as the yield curve continues to flatten.
Euribor spreads have been very flat, with slight pressure on the front end as Interbank lending rates rose on the back of the Spanish actions.
Short Sterling spreads have been on the rise on the back of hawkish BoE comments from the minutes yesterday, and today we seemed to have stabilised around those levels some what, with some chunky size still around which is good.
Below is some video analysis of some of this weeks moves:

Wednesday, 18 April 2012

Short Sterling and Gilts Drop on MPC Minutes

Today the Short sterling traders have come out in force as the minutes indicated pretty much that it is very unlikely we will have any more QE. Across the strip we are trading well above 1 million contracts traded. Jun13 Short sterling has traded 271k as of 2.30pm, when lately we have been lucky to have 30k volume traded the whole day in these individual contracts.
So what has been happening; Well there was a 35k spread put through long 5s in Jun13Sep13. I also saw a big chunk sold at 4s in Mar13Jun13, so possibly butterlying it up Mar13Jun13Sep13.
There was also 19k that went short -2s Jun13Sep13Dec13 fly. So it seems they are of the view that we will get more steepening further down the curve I.e possible rate increases into mid 2013s to late 13s.
A pretty sizable bet for sure. Either way it was good to see the volume coming back into these contracts and hopefully we get some follow through. Time will tell!
Gilts fell from 115.92 to a low of 114.80, where as Bunds have reached mid 140s again, which is getting back into short territory again. Worth a go again I thinks!

Tuesday, 17 April 2012

Trading Update

The last few days have been ultra flat in the STIR space as the spreads have been very lacklustre, and been traded on very low volumes which make scalping in and out extremely difficult. In fact the last two days I have done minimal trades in the Euribor as I've had to look else where to make some money in this market.
The Euribor and Short Sterling Spreads are near lows of the range, but a good Zew and slightly stronger core CPI out the UK has helped push the spreads up, so if you took the long position and was patient enough, it paid dividends today.
The trade really was the Bund as it went back to the mid 140s, and this has consistanly been a winning short at these levels, as we are now trading sub 140 again. Either being the 2s 10s or selling the bund has given at least 100 ticks each time its reached 140.20s-60s in the Bund.
There is always the risk it can continue going higher but with yields at 1.7% it doesn't make sense for it to hang around the high 140s for long.
If we get back up there again I will be looking to buy the Euribor spreads again, focusing on 3.5s in Mar12Jun12, and 4.5s in Jun12Sep12, which I think will be good for 1/2 to 1 tick.

Friday, 13 April 2012

Stocks drop as Chinese GDP disappoints

After a big two day rally in stocks and fall in bonds, Stocks are looking weaker again and Bunds have reclaimed 140, as Chinese GDP disappointed. Part of the rise in the market yesterday was on the rumour of a stronger Chinese GDP number, so the fact it came in weaker caught the market off guard.
Since the last post we did have that drop in the Bund which always seems the case when we breach 140, and we came off almost 100 ticks to trade 139.49 low from a high of 140.41. Another move to this type of level would most likely be another high probability sell.
In the short end the Euribor spreads bounced as expected, as Mar13Jun13 went from 3s to 5s, Sep13Dec13 spreads is trading 8/8.5, after being long at 7s I only managed to nick a 1/2 tick, as it was struggling around 7s for 2 days, but patience was the key for the move up in any of the spreads.
At this moment finding it a bit difficult to commit one way or the other, volume is a lot lighter then the beginning of the week, which is making trading a bit more difficult. Right now im looking to buy in short Sterling at 1s in Mar13Jun13, and generally buy along the curve as it hasn't had the same bounce as the Euribors, but today its barely moving so unless anything else changes looks like it will be easier to find the opportunities next week.

Tuesday, 10 April 2012

The sell off continues - Mad CAC spike!

Equities are continuing the weakness this week, and we breached 140 in the Bund, nearing record low yields in the German 10 year, as well as other 10 year contracts.
Euribor Spreads continued lower, and now breaching previous support levels, but as I do I'm buying into them, especially the back months as the spread is becoming too tight given its so far out, and probabilities favour a bounce. Im long Dec13Mar14 at 7s, given that we were trading above 10s a few weeks back, I think there is good value in this, although it still may drop a bit before going up.
Given the long holiday the 7am open was always going to provide some volatility, and we got it with a massive spike down in the CAC as it looked like some dumped a boatload at market causing a 100 fat tick spike down in a matter of seconds before it retraced later in that 1 minute bar.
See below:

The move in the CAC was very brutal and it was either a make or break if you were involved.
Looking at Bonds, it will be interesting to see how long the Bund can hold these ultra low yield levels, and as has held true before, I think we are good for a 100 pips at least to the downside, although I think the nearer the Bund is to 141, the more appealing the trade will be.
Good Luck

Thursday, 5 April 2012

Bund Futures posts new Highs

So after the big (overdue) sell off in equities, the market piled in the safe haven securities again as the Bund broke 139s and is heading towards 140. What was notable was the volume was much greater yesterday suggesting there could be further to come.
This in turn has lead to falling spreads, and my longs from yesterday were in trouble yesterday afternoon. Being long Mar13Jun13 6.5, the spread quickly fell to 6s, and then were trading small 5.5s, I managed to get long Jun13sep13 at 6.5 and took half tick on that to then take myself out at 6s on Mar13Jun13 and I'm glad I did too as this is now trading 5/5.5s. Normally I would look to buy around there but with the four day weekend coming up, I will wait till tuesday to see if its still there. Dec13sep13 fell also bought more at 8s and got out at 8.5s.
Its often the case when it looks like its a daft idea going long as spreads are going down that we then get the big reversal which has proved to be the case twice in the past month already, so unless anything significantly changes I will still look to go long at these levels.
Below is some video analysis of the moves in these spreads:

Have a happy easter!

Wednesday, 4 April 2012

FED minutes show no signs of further Stimulas

Yesterday evening we had the fed minutes out, and there wasn't evidence of further stimulus, which in turn led to a sell off in bonds. Bunds fell from 138.40s to as low as 137.60, on the news and as you would expect the yield curve steepened.
The dollar gained alot of strength as you would expect to, as we saw big sell of in dollar pairs, notably the Euro dropping 160 pips +.
Having been long the Euribor spread from earlier, this provided the perfect opportunity to get out, looking back wish I bought more earlier.
However Bunds have fully retraced the move and the spreads have all come back again. I have tentatively gone long a small amount in Mar13Jun13 at 6.5 and Dec13Sep13 at 8.5, but with the ECB rate meeting later on today won be doing much more other then that. Hopefully there is an opportunity to get out before then. It seems now that the front end of the curve is much more bid then the back end, so hopefully that fact will help the front end spread move up.

Tuesday, 3 April 2012

Euribor Spreads holding Steady

After the retrace in the Bunds, and retrace in Euribor spreads, it seems for now that we are holding steady around these spread levels. We are trading 7/7.5s Jun13Sep13 as I write and 9/9.5 in Sep13Dec13. These spreads have all fallen as you would expect from the lofty highs two weeks ago as the Bund has retraced its 300 tick move downwards. On top of this Stocks seem to have found value to as we trade in a smallish range.
Looking ahead with 7s holding well yesterday in Jun13Sep13 and 8/8.5 being the last point of support for the sep13dec13, I'm inclined to go long around here. In fact as i write i long small 7s in Jun13sep13 and long 9.5s Sep13dec13. Unless anything changes fundamentally in the next few days I expect these levels to hold up, hopefully for a small retrace back to 7.5s/8s in Jun13Sep13.
With a four day weekend coming up it could be more quieter then usual as we approach the end of the week, but tuesdays open could be very lively as we are still going to have the release of Non Farm payrolls on Friday although most markets are shut. Should be fun!

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,...