Well with yesterdays rally in the long end, we had some expected pullbacks in these lofty spread prices. Front month euribor spread came off over 2 ticks. Jun10 Sep10 is now trading 24s after trading 26s early yesterday, and Sep10-Dec10 spreads are trading 30.5s after trading 32s yesterday. Further out spreads have remained pretty much unchanged, only falling marginally. With trichet press conference later today we will have to see where we go with these into the afternoon.
The spike up in bunds yesterday brought to the upper band of a downward channel, at just below 120, since then it has retraced but if we continue breaking the top level, we could have a big bounce in the bund to 120.50.
If not 118 is the next stop. We shall see how it pans out.
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