After the massive move up in the Bund yesterday, today's volatility didn't disappoint. As mentioned yesterday 124.50 proved to be a sticky point and of the open we came of 40 ticks before settling at the end of the day 123.79. The real story was the divergence between the Schatz and the Bund. Over previous session the bund has been particularly weak relative to the short end which is to be expected but today the schatz was pretty much unchanged where as the Bund was up over 150 ticks reversing the move up in Schatz/Bobl and Bobl/Bund spreads over the past few weeks.
Seeing this correction I tended to favour short position across the Euribor curve, which turned out to be the wrong play as white months were much more bid during the day. I spent the whole day averaging and managed to salvage the position as late on the spreads pulled back a bit.
Volume was good through out, with the euribors trading above 100k in front months, bund traded over 1 million contracts, just like the old days.
Looking forward, I still favour the bund to the downside despite the recent action by the fed, and in terms of euribor spreads, I would be looking to go long on any pullback as it looks increasingly likely the ECB will keep on cutting.
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Hi Raj, how far do you think the ecb will go before they stop cutting, also what do you think about the comments about uk being one of the final countries out of recession? Are there any eurodollar freedom fighters out there? Would like to see different perspectives.
ReplyDeleteThanks again Raj you're the best.
I think the ECb will probably go 1% I don't see any more personally. And yes the UK is in real trouble but I think we will bounce back quicker then they say, these are all doom and gloom guys, they have nothing better to do.
ReplyDeleteThanks for your posts Commando