Wednesday, 27 March 2013

European Yield Curve continues to flatten

As worries about Cyprus continues and the possible knock on effect on the rest of Europe we have seen the type of trade which was common in 2007/2008 where we had a flattening Yield Curve, and at the current pace it could even become inverted!
Currently we have the Bunds up 64 ticks for the day and Mar14 Euribor down 1/2 tick and on its lows.
Spreads have continued to come off and are on lows that I haven't seen yet for this cycle. I continue to buy into this, but very cautiously as it doesn't look like letting up at the moment.
What the main risk is whether the credit grade of Euribor will worsen, and if so we will see the front months get hit quite a lot as Inter bank lending can dry up on the sign of loss of confidence within Banks.
With a four day weekend coming up in Europe, I suspect something big will be announced over the weekend.
We shall see!

Thursday, 21 March 2013

Another week, another bout of leaked data

Today we had a lot of data out, and they're were all out of line from expectations, which led to some nice moves in the market. But wouldn't it be nice if you knew the number before hand. Well some people do, and its becoming a bit of a joke. We had UK retail sales numbers at 9 30 UK time, with cable being pushed up 20 ticks or so coming into the data, you could see buy orders pushing it up just as the data was due.

And in a more blatant leak, Nat gas again was spiked down 40 ticks just before the number came out, and then low and behold a build in nat gas and we had a bigger spike.

In other stories, Cyprus continues to dominate the headlines, as the uncertainty over what will be there course of action is unsettling the market.
Also poor PMI numbers out of Germany and France pushed the Euro lower.
Euribor yield curve continues to flatten into the afternoon, as Mar14Jun14 is trading at 3.5s, and Jun14Sep14 is approaching 4.5s. These levels held up very well earlier in the week, so if they get there again, mite be worth a load up!

Tuesday, 19 March 2013

Cyprus Issue pushing down Spreads.

While equities continue to go higher on the back of possible action out of Cyprus, Euribor and Short Sterling Spreads and the Yield Curve in General has been under alot of pressure, as we approach multi month lows in these spreads.
As I always do I have been buying these Spreads as they approach these levels, but with a bit more caution as its hard to tell how long this will continue. Yesterday presented some good volatility as we pushed up in Bonds, before retracing a large part of it. Mar14Jun14, Traded from 5s to 5.5s, yesterday but today has traded down to 4s as the move continues downwards. Im long some 4s and 4.5s looking to get out at 4.5s if it comes. This story is replicated along the curve, in the red/greens, Mar15Jun15 traded 6.5s rebounded to 7.5s, and now trade back to 6.5s and traded as low as 6s earlier this morning.
Todays action has not been as volatile as yesterday, but there has been so big clips going through, on this yield curve flattening.
Going forward the main event of the week is tomorrows FED announcement  This will give further guidance on how accomodative the fed will be, hoping for some fireworks!

Tuesday, 12 March 2013

Trading Update

Been a couple of weeks since my last update. Mainly because there hasn't been anything out the ordinary trading wise. Its pretty much been lower volume and volatility as far as fixed income is concerned with spreads drifting lower.
We had the ECB and Non farm last week, with Draghi being less dovish then was expected, which gave a boost to the euro. Non farm came out much stronger as well, with well over 200k jobs created in the US in the previous month with unemployment rate ticking down to 7.7% This has helped to underpin the rapid rise in the stock markets as we are hitting record high after record high in this DOW.

Personally i think we are due a big correction, but it seems that any sign of weakness is the sign for stocks to be snapped up for those waiting for pullbacks.
As far as spread trading is concerned, I have been long pretty much for the past week, trying to nick half a tick here and there. Ive been trading mainly around Jun14 to Jun15. Especially Mar15Jun15 spread which traded as low as 7s, and is now back up to 8s. Im now looking to short this at 8.5s if it gets up there. I'm also looking to short 7.5s in Dec14Mar15.
Hopefully we will get some better volatility out of these markets in the coming week considering its quarter end, and roll over for all contracts pretty much.
Looking ahead this week, the main data we have is US retail sales on Wednesday, and CPI figures on Friday as well as triple witching on Friday with expiries in March Stock Index Futures and Options, which could lead to some wild movements.

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,...