Tuesday, 12 April 2016

Short Sterling Spreads Rebound

Its been a while since I did my last post, with markets much tougher to trade as a STIR spread trader. Often the lack of movement has meant you have no option but to hold positions for multiple days or weeks till you take a profit.
I currently amassed a long Short Sterling position, which isn't surprising given the big bout of flattening that first started end of January. The Spread has come off a relatively large amount, falling to a low at the beginning of Feb. It was an unprecedented move, with the curve which has been dead for the past few months dropping like an out right, with Mar17Mar18 spread dropping from the 30s to 9 on Feb 9th. Since then it has rallied a little to a high of 25 but on Friday dropped to a low print of 10.
Ive been long the spread in some form for the past 2 months, jobbing in and out, to where I'm finally break even, and hopefully a move back higher by a few ticks in the 12 month will get me a good out.
Todays inflation data is a push the right way to help dispel some of the rate cut calls from the BoE, but whilst the economy is still sluggish looks like accommodative policy will be here for the foreseeable future.
The problem arises that technological advances are making things more efficient and hence lowers costs, which in term keeps prices lower. This inevitably puts a cap on inflation, so will we really get that inflation these central banks are looking for. I doubt it, either way for the time being its sell any rally in STIR spreads.

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,...