Tuesday, 31 July 2012

All eyes on FED and ECB

The monster rally we have had in equities and the Euro on the back of comments out of the ECB that they will do whatever is necessary has put the market in a position where any disappointment will smack everything back down again.
Hopes that some type of European solution will come out of the ECB meeting on Thursday is spurring the markets with talks of a further rate cut, another LTRO program, or even Quantitative easing.
As far as the Spreads go we have pushed up along the curve, with Sep13Dec13 trading at 6s after being at 5s, Mr14jun14 trading as high as 7.5s after trading 5.5s/ 6s a week back. We are starting to fade these moves slightly, but in reality I dont see any other outcome then a full fade eventually as I dont think there can be a sustainable solution to this problem, despite these short term solutions. I have been trying to go short on any move up, and so far this has been working, but I will be wary of this after the ECB meeting if comments are positive for the Euro zone.
With the ECB on Thursday, the FED on Wednesday and US Non Farm Payrolls on Friday, we are set for a bumper week and potentially alot of volatility.
Fingers crosed!

Monday, 23 July 2012

Stocks sell off as Spanish Yields top 7.5%

Its been a pretty gruesome session to say the least. The Dax along with the all the other European indicies are being sold off aggressively as fears grow that Spain would need a full sovereign bailout.
Dax is down almost 4% as I write and as you would expect Bunds near all time highs again, trading currently at 145.87.
The Euro has been hit hard with it trading below 1.21 against the Dollar, and at this rate we looking to test the lows set June 2010 at around 1.18. The difference is this time we have much bigger economies struggling where as that time we were dealing with Greece, Portugal and Ireland.

As far as trading action goes in the STIR spreads, surprisingly we haven't come off as much as you mite expect. Jun13Sep13 Euribor has been trading between 2 - 2.5 the whole day with low volume again, and its a similar story all along the curve. The lack of volume is still making it difficult to trade, but if we get interbank lending tightening up as we did in 08/09 we could start to sell of at the front end of the curve bringing some volatility and volume.
As the markets are pushing Spain's hand more and more, its only a matter of time before a bailout is requested, and the question is who is next! Worrying times...

Monday, 16 July 2012

Spreads stagnant as trading action minimal

Personally I have found this month pretty tough as the lack of volume, and movement in the STIRs has given minimal opportunities at best to try make anything. We have bounced of the lows in the spreads but not stuck in a very narrow range. Im hoping things pick up soon cause this is tough to make a living.
Not much else to report really, as European worries persist as they will for time to come and that concern will keep traders out the market.
Hopefully something changes soon!

Wednesday, 11 July 2012

PFGBest collapses! Add that to the list...

Just when I thought it couldn't be worse afte MFGlobal, another big retail brokerage serve has collpased. PFGBest with between 500million to a billion dollars in assets been missapropriating funds and has a 200 million dollar short fall. As if confidence wasn't low already, we now have another name to add to MF and worldspreads. And worse this happened in the USA with the tough regulation of the NFA & CFTC. So where there is a will there is a way despite the regulations put upon you. I cant imagine this helping confidence at all, many more are affected, and that is more people out of the futures market.
Some further details:

On or about June 29, 2012 PFG reported to NFA that it had approximately $400 million in segregated funds, of which more than $225 million were purportedly on deposit at U.S. Bank
On or about July 9, 2012, NFA received information indicating that PFG’s Chairman may have falsified bank records
On July 9, 2012, NFA made inquiry with US Bank and learned that rather than the $225 million that PFG had reported as being on deposit at US Bank just days earlier, PFG had only approximately $5 million on deposit at U.S. Bank.
Translation: another $220 million segregated account pillage has just taken place, in the vein of none other than Jon Corzine and MF Global.

The money has now officially vaporized.

It is truly wonderful of the NFA to finally get involved, after PFG’s clients have lost about 98% of their cash held with the firm.

Friday, 6 July 2012

ECB, BoE add more stimulus to prop the markets

The ECB cut rates by 25bp as well as the deposit rate, and the BoE conducted 50Bln Sterling more QE as was the expectations which led to a 150 pip sell of in the Euro, and a big drop in the Euribor spreads, as the curve flattened further.
Jun13Sep13 went from trading 3s pre announcement to trading 1.5s at the end of the day, the same was try across the curve.
I was short 7s Dec13Mar14 took a half, to then see it go further down and we are now trading 5.5s.
It was a tough day to be going long as there wasn't much pullback. This morning we seem to be consolidating around these level, and I took the opportunity to go long selected spreads, and waiting for some type of pull back which I expect.
The Bund has started to go back towards highs as we have moved up 100 points since the rate announcement yesterday. This was apart of the broader flattening as the 2s 10s spread also flattened as you would expect.
Today we look forward to Non Farm Payrolls and a further disappointment could lead to further flattening as safe haven buying would most likely be the play of the day.
Although if that is the scenario, we could later rally in stocks, as it adds to the probability of more Stimulus out of the FED.
This afternoon should be interesting!

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,...