Long term bonds sold off again yesterday with a breach of 119 in the Bund this morning, we have gone as low as 118.82, with 118 the next target. This has filtered through along the whole curve with Euribor spreads at highs with Jun10-sep10 trading at 26s, Sep10-Dec10 trading at 32s with the far end of the curve on the rise too.
It is hard not to go short right now given the lofty levels of these spreads , but it is wise to hedge using butterfly strategies as there seems to be no stopping this move upwards. I'm relying on a more staggered move upwards in spreads to give me opportunities to take 1/2 ticks in these spreads as I short new highs, but I am quick to scratch should it go against me.
Stocks sold off as long term yields rise resulting from the subsequent sell of on the long end. Higher borrowing costs are deemed as a risk to an economic recovery. This is the third time we have tested the 8500 level in the Dow and until we break one way from this small range forming, it will be unclear as to where we head from here.
Markets are also nervous from the impending GM bankruptcy and the auto sector also got a hit from the bankruptcy of Visteon the auto parts company, this surely will continue to put pressure on the jobs market.
High light of the day today will be the durable goods number from the US at 1.30pm GMT and new home sales at 3pm.
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