Friday, 23 May 2014

Yields come back after Sell off

Last week was a pretty big week for Yields as they reached very low levels in the Euribor curve and the flattest I've seen it on the back of negative rate talk. I took the opportunity to get long and I was very long having averaged in 5 prices or so, and the much needed pullback arrived slowly but surely which gave me overall a scratch I would say, but in hindsight this was a good trade, but I got out too much of my position too early. June's ECB rate meeting is likely to be a busy one with Draghi pretty much saying there is going to be further easing in this meeting. With poor PMIs from European nations it seems that some form of easing will be on the cards, whether it be a rate cut or QE remains to be seen.

This week has been very quiet and today has been one of the quietest days I've seen in a long while, with the UK and US shut on Monday volumes have been very light. There hasn't been much to do and its a matter of churning out what ever you can and waiting for hopefully some volatility to return to these markets.

Complacency seems to be rife with the VIX at 11.65 and the VXX at 35, sellers don't seem a match for the buyers as large Cash pools within companies and on the sidelines will just keep this Stock Market going higher and higher, and so at the moment it seems that any kind of correction will just be met with a barrage of buyers. Though the contrarian view would suggest that it is for this reason we will get some kind of correction, although it doesn't look likely given the current evidence.

Thursday, 15 May 2014

Bond Yields dropping Big!

Bunds trading 146.17 as I write, didn't think I would see that level in a long time, but it seems that negative interest rates in the EU is a given now. The Yield curve has experienced some aggressive flattening, which is proving very difficult to trade.
Stupidly enough I've started to buy these Euribor Spreads, thinking that the Red and Green months spreads have already been hammered quite a bit were a bit over done so maybe we mite get a bounce, but this hasn't been the case, its literally been a one sided market, not a tick retrace to report, so at the moment quite underwater on my positions, but I've played it relatively small so hoping for some pullback. I'm long Jun16Sep16 at an average price of 8.5s and Mar16Jun16, at a price of 6.5, looking to put more on as it continues to go lower.
Below is the chart of of the Jun16Sep16 Euribor Spread, where we see a straight line down pretty much in the past week.



Not a pretty chart for a spread trader at all, but hoping we get some stabilization soon.
Short Sterling on the other hand has been pretty flat, with yesterdays inflation report signalling that rate rises will be gradual and there isn't any real hurry at the moment. The UK is at a totally different point to the EU, where rates are going in opposite directions, which makes you wonder what would have happened had the UK adopted the Euro.
Not much more data out this week so hoping for some stabilization soon!

Thursday, 8 May 2014

Sideway choppy and difficult!

The last week has been some difficult conditions to trade, Volumes have been low in Bonds in general, Bonds and Stocks keep wanting to go up, hard to get any traction anywhere. Scalping equities seem to be the best play right now, keep buying on any dip and your golden, its worked for a year plus, but its the feeling when it comes off that this is the one where we pull back more then 2% that is a constant snag, but time and again I'm proven wrong. Right now I'm short the Dow and twice was 140 points onside before twice seeing that disappear within a day. In hindsite I should have taken the profit, but its that feeling that this will be the one, this rally can't last forever, but low and behold its the same thing all the time. Its likely now the bulls will just push this higher and i'll be stopped but I'm willing to take the loss given that one day I can really nail the short.
On the Euribor front, we have bounced off lows where we got as low as 2.5/3s in Jun15Sep15 which bounced as expected to 3.5s but since that move up we have had low volume sideways churning, and all eyes are on this afternoons BoE and ECB rate decisions. Although it's unlikely anything will happen with rates hopefully the associated commentary will lead to some opportunities. Banking on some movement here.
Going forward, there's not much else out for the rest of the week so its a matter of scalping what you can, and keep ticking over till some real opportunity comes.

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,...