After some pretty aggressive selling along the yield curve lately, Bunds have jumped sharply today, trading at 118.67 at the moment, after twice testing 117.50. A break over 119 is looking increasingly likely, as long dated bonds retrace some of its move down.
Euribors are also rallying a bit, after being drilled lower from persistant rate hike fears. Front month spreads contine there march upwards, with Jun10-Sep10 trading at a high of 30.5! and Short sterling Jun10-Sep10 spread trading at 48! That is pricing in almost a 50bp rate hike, a tad over done in my opinion.
I continue to try short new highs, and using butterflies to hedge myself against the continuing rise in the spreads. Seems to be safest strategy of late.
With Stocks there is a real tug of war with the bulls and the bears. The bulls just have it at the moment, but it does look very much like a reversal is coming. But then again every time it looked like it was heading lower before, the market headed on another leg up. I cannot make sense of this huge rally, and I have decided to buy some puts in the DIA which is the Dow Jones ETF, for September expiry. Ill keep you posted on how it goes.
Looking forward to the US session today, futures are pretty flat, with European market slightly down. We have Michigan consumer confidence later on, which may dictate the direction of the market today.
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