Friday, 29 June 2012

Global stocks surge after EU agreement

Stocks surged as did pretty much every currency against the dollar as there was a major breakthrough at the EU summit.
The agreements include: the European Stability Mechanism (ESM) loan to Spanish banks will not have senior creditor status which effectively takes pressure off the country’s credit spread; the ESM will also be allowed to directly recapitalise banks; the rescue funds themselves will be used more flexibly to support compliant countries; and finally, the European Central Bank (ECB) will be acting as an agent for the rescue funds in market operations.
It was pretty much one way for stocks but for bonds we initially came off before going back up again. The Euribors provided a good shorting opportunity as we hit highs in the red month spreads before coming off for the 1/2 tick. After the first couple of hours of trading, it all sort of died down, and it was another low volume day for the Euribor.
However all in all June has been a positive month with plenty of events providing the volatility to be able to catch some swings for us day traders.
Hopefully July continues that way, as we have, as always a busy data week next week most notably, ECB press conference, BoE rate decision and Non Farm Payroll!
Hoping for a good one.

Tuesday, 26 June 2012

Buying the Euribor Spread selloff

After the sell of In Euribor spreads yesterday, I took this morning as an opportunity to buy up everything as they were at week lows. And we did get a brief rise in these spreads which got me out of those positions. After managing to get long 7.5s in Mar14Jun14, and small 5s in Dec13Mar14. These spreads have now started to come back down towards morning levels so looking to potentially buy again. Looking else where European issues continue to plague the market, and its seems like the market is just waiting for something significant which as of now doesn't look like it will come. (Famous last words..) As its the last week of the month and data is on the light side, I will be trading much more cautiously as volume has dropped off, and so trying to avoid being caught on any significant market moving news.

Friday, 15 June 2012

BoE Liquidity injection

The Bank of England will activate an emergency lending program on the back of worsening condtions domestically and europe. "We are not powerless in the face of the euro-zone debt storm," George Osborne said, according to reports of his speech. The program is called the Extended Collateral Term Repo Facility, under which auctions of short-term sterling liquidity can be held at any time. The Bank of England will start holding auctions of sterling liquidity with a maturity of six months, the Bank of England said. Osborne also said the Treasury would provide cheap funds to U.K.-based banks if they boost lending to British households and companies, dubbed "funding for lending." Meanwhile, BoE Gov. Mervyn King said at the same event that the central bank would not expand its quantitative easing program into private-sector assets. "It is strange that those in Parliament and the press who feel the central bank should not talk about fiscal policy are often the most enthusiastic to see the bank actually do it," King said.

Well this really spiced up the Short Sterling Market this morning as we had a 15 tick move up across the curve with spreads falling initially before retracing and now we trading what we were at the open. I managed to get long 2s, and some 1s in Sep13Dec13, and got out for a tick as well, as getting long -1s in Jun13Sep13. The extra volatility provided good opportunities which is a rarity lately but hopefully with the upcoming Greek Election results and Fomc meetings at the States will provide further tradable volatility.

Below is a video with some analysis on the moves over the past few days, as well as general thoughts.

Monday, 11 June 2012

Spanish Bank bailout pops up Spreads

The market reaction for the much rumoured Spanish bailout, is starting to dwindle, after strong 130 pips gap up in the Euro, a 100 point + rise in the European equity indexes, as well as new short term highs in many of these Euribor spreads. But as could have been assumed, we pretty much given back all of those gains and are where we were Friday as Mar14Jun14 Euribor spread which was trading as high as 9.5s is now 8.5/9s and Dec13Mar14, which was trading above 7s now is 6.5 offered.
Bunds are close to being back near the flat line, after bein off 80 ticks earlier.
This reaction is very much expected as Europe are still burdened with debt, this is simply added further to Spanish debt, and although a short term solution, it cant get away from the fact that the Economy isnt growing fast enough, and that Greece are pretty much doomed.
Im looking to short all these spreads back to the low levels as I cant see much sustained upside momentum. Sell the rallies in these Euribor spreads is my play.

Thursday, 7 June 2012

STIRs Spreads rise, as risk on sentiment continues

After a barrage of selling and ultra high yields in government bonds, we have had some respite with a big rally in stocks yesterday on the back of hopes of a coordinated action to help eurozone nations.
This lead to a 200 point plus sell of in the Bund, and spreads especially the front months have come of lows.
We have Jun13Sep13 Euribor spread trading at 3s/3.5s after being at 1s two days ago. This move havs been a big one, but it is now at resistance levels, so a sell at 3.5s and 4s would be a good bet so will be looking for that opportunity.
Short sterling wise, we have come up slight in spreads too, but with the BoE rate decision minutes away, and with a slight possibility of QE it is prudent to stay on the sideline till that decision has been taken, and assess the situation then. QE would be unlikely, but the Bank of England have been known to surprise before, but with there previous worries over inflation, likelihood is low.
Looking forward, we likely to be trading on the word as has been the case lately, as rumours about possible bailouts and continue, although nothing concrete has been set yet. This will continue to be the theme, and we also have Bernankes speech at 3pm UK time, which will be closely watched, any hint at more QE from the US could bring about some volatility too.

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,...