Tuesday, 13 August 2013

Yield Curve Steepening in anticipation of the FED

The last week has been pretty quiet, volumes have dropped across the board and I pretty much thought this is it for august everyone has gone home. However yesterday afternoon we some volume return with a sharp Steepening trade across the Bond space, after better then expected ZEW data out of Germany and slightly better retail sales have some to believe that tapering is all but confirmed in Sep, although personally I think could happen slightly later.
Either way we had a push down in Bond markets with Bunds back below 141, and Euribor and Short Sterling Spreads pushing up. As per usual I was selling into it, as the front end and red months 3 month Spreads were pushing higher, and the back end of the red months and Green months were staying put. Although it wasn't easy managed to make a small bit from it, as I shorted 7.5 and 8s in Sep14Dec14 and managed to get out at 7.5s, I also shorted quite a few 12.5s in Sep15Dec15 and took the half tick on that also. This morning I've gone long 12s as the front end looks very bid and so hoping for some follow through in this Spread.
Looking forward we have BoE minutes which will be the highlight of today, so hoping for some movement of that, and tomorrow we have UK retail sales and CPI data out of the US. Volume will remain light and i dont think it will really pick up till September now so we are likely to only see pockets of action, as well as low volume manipulation.
Have been seeing some big spikes in the Dax, and a big spike in cable yesterday which was exaggerated by the low volume so its worth being careful on limit orders, as its always tougher to trade in this type of environment.

Wednesday, 7 August 2013

All eyes on September

As we are into August, volumes have dropped of a cliff, but data has been coming out strong all over. PMI data has come in strong for all regions as well as factory orders in Germany and so this all points to an improving macro economic picture, which leads us to the question, what will the FED do in the September rate meeting. It is inevitable that Augusts Non Farm Payrolls will have a massive effect on whether or not they will start tapering their Bond buys, and so this report will no doubt bring huge volatility with it, which is good!
Personally I hope they start tapering as this would bring back a lot of volume, and starting making these STIR trades very interesting.
We have been ranging now since the initial move back in June, and its been a matter of picking the ranges. Its been quite difficult because volume has dropped off and its easy to be drawn into shorting too early when it is flat lining, to then be offside, and needing to average.
The main event today is the UK Inflation Report, this hopefully will be a good one as its the first meeting for the new BoE Governor, and hence mite bring about some good opportunities.
The pattern of late has been that Spreads have been dragged up from potential FED tapering, then smacked back down as Europe and UK maintain there still in full accomodative mode. So if something changes in the latter, we could have a new leg higher.
Looking forward there's not much to look forward to as we enter the heart of August, and most big players are away, this is like to lead to more volatility in Equities as it is likely to be much thinner so more easily manipulated. So hopefully September delivers.

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,...