Wednesday, 29 May 2013

Euribor Spreads pop up one the open

Bit of a hairy moment this morning having been short the spreads overnight, we had a 2 tick gap up on many of the front month 3m Euribor Spreads, which put me immediately offside. Its the worst case scenario usually when you hold overnight, but the weirdest thing is I cant find a definitive reason for the jump up.
Either way I shorted everything I could, selling 8s in Sep14Dec14, 7.5s in Dec14Mar15, 8.5 in Mar15Jun15, and 9s in Jun15Sep15. Luckily they all retraced, and in fact I ended up getting out too early as the spreads are looking to fill the gap.

Either way there's alot more action then there has been which is encouraging. Bunds have come off quite a bit trading now at 143.42, considering we were trading at 147 at the beginning of the month. It was always a sell up there as yields just didn't make sense, hindsite is a wonderful thing though as at the time it was just tough to hold on to the trade.

Equities are starting to become a bit more erratic as it seems around these levels we have found value. A big up move is proceeded by a big down move, so it will be interesting what we do from here.

Looking forward, all eyes are on next week as we have the usual raft of data coming out which will tell us we we are, any good numbers might lead to a further sell off in Bonds, and more steepening in the Bond curve as bets on withdrawals of stimulus will intensify.

Wednesday, 22 May 2013

Nikkei down 1143 points!

After trading up in most indices for the majority of the day, there was a big reversal late on on Fed minutes and primarily contractionary Chinese data. When the supposed growth driver over the world has components of its economy contracting then we know things are still fragile.. but we know this anyways but the stock market continues to ramp up regardless of late, and although we are looking at a sharp pullback at the moment, I think its only a matter of time if current trends are anything to go by before the "bargain hunters" come in and ramp this back up!

The Nikkei 225 is down 1143 for the day with that being the biggest drop in 2 years. This drop shows how quickly things can turn if sentiment changes on a whim, but given the massive rise in the Nikkei so far this year it is not the most surprising thing to see such a pullback although what you would expect over a few days has happened in one day. To see what the real market sentiment is right now, we will see if tomorrow is bargain hunting day or we continue to sell off.

On the Bond front we have had a slightly bid tone to the Euribor spreads as we slowly edge up. Although acitvity remains subdued somewhat it is better then what it was. I have personally trying to just scalp short as we move up, with particular attention to the back end of the curve which seems to be moving the most. I have shorted 7s and 7.5 in Jun15Sep15 looking for 7s and 6.5s as an out. The economy still is fragile which will put a lid on any upward movement, although patience is key.

Looking forward we have UK GDP numbers which should validate that the UK isnt in a recession, but any weaker number then expected will continue to put pressure on cable as we look to breach 1.50.

Monday, 13 May 2013

Euribor Spreads moving finally!

After have a range of 1/2 a tick for the best part of 2 or 3 weeks, last week we finally broke out and moved to the upside, and as you would expect it didn't move just half a tick, it moved liek 3 or 4 prices, making me very annoyed at myself as I took 1/2 tick everywhere. I guess its just in my nature to do that but either way, the patient long holders reaped there rewards.
We have moved quite substantially in the back end of the curve, with Jun15Sep15 moving from 5.5s up to 7.5s, Mar15Jun15 trading from 4.5s to 6.5s and the story is similar along the cuve. If we look at the Jun14 Sep15, which represent the mid part of the curve, we moved from 19s on friday to 29.5 friday evening, which is hug!
I howver was shorting the 3 month spreads the whole move up and the negative rate comment from ECB's Visco saying "if the economy needs further help the ECB will cut the deposit rate to negative territory," gave me my out. Now just sitting back waiting for another push higher hopefully to short again.
The volume has definatly been more biased to the upside as we can see below with big clips going through in both Euribor and Short Sterling.

Wednesday, 8 May 2013

Stocks and Bonds on highs! Makes sense..

Im watching stocks doing there normal thing, push to new high day after day, and the Bund wants to join in also, as this is trading at highs of the day. As stocks push up so does the Bund, so much for the saying buy stocks sell bonds!

Friday, 3 May 2013

Non Farm Beats Expectations

Been quite an eventful day so far, with a beat in non farm topping off the movement. We started the day off quiet, but the ECBs Nowotny came out saying that the market over reacted to the Negative rate comments from Draghi, this sparked some life into the Euribor contracts, and gave some good opportunities to get long some spreads.
This comment was later retracted with Nowotny saying that the market over reacted to HIS comment, this pushed Euribors up again, time to get long more spreads. I went long 3s, in Jun14 Sep14 and 4s in Mar15jun15.
We now just had non farm, which pushed these spreads up, and gave the half tick profit!..100 tick Spike in the USD/YEN, 100 point move in the DOW, as well as big moves in the other indices. Bund is down 40 ticks.
This was mainly triggered by a 50k revision to the previous number coupled with the 25k beat for this months number.

Here are the moves in the Dow and the Yen. As you can see the yen spiked down 30 pips jus before the number. Big punt, or leaked info?

Thursday, 2 May 2013

ECB Cuts Rates, Ponders Negative Rates!

It was a pretty split consensus as to what teh ECB was going to do today and they decided to cut 0.25%. This isnt going to have much of an impact but its more symbolic in my opinion.
Draghi remained very accomadative which led to wild fluctuations in the EURO and the BUND.
Initially we came off in the Euro and then pushed higher by over 100 pips as we rose above 1.32.
However we then came off heavily going below 1.30 as Draghi said the ECB are open to the idea of negative rates.
This pushed the Bunds also above 147! And killed any hopes of Euribor Spreads pushing further upwards.
Trading the Euribor spreads has been difficult of late, purely due to lack of participation so today's move were some what of a relief. We did pop up in spreads initially but we are now on new lows as the Bunds consolidate above 147 and the curve is likely to flatten further.
It will be tough to know how to play this as in general even if you manage to get a good price the general lack of action makes it hard to get out, but my philosophy is to always buy these new lows, so I will remain a buyer as it keeps drifting lower, waiting for the pop up if one does arrive.
Tomorrow we have Non farm payrolls, which are likely to be poor which will put further pressure on these Spreads, but hopefully some volatility will arise from the number allowing for some quick scalping in and out.

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,...