Over the last five days we have seen government bonds trade sideways, both the US Ten Year and the Bund made yearly highs but these prices were quickly rejected. This week promises to be busy with rate decisions out of the ECB and BOE as well as the latest jobs report from the US on Friday.
The Bund and US Ten Year appear to be entering a consolidation phase after a strong rally, this being said this is more likely to be a pause for thought rather than a medium term turning point. The Bund should look to hold above 122.55 if its upward momentum is to be maintained, a break back below the 50% retracement at 122.27 would demonstrate the bulls have lost the war and a break of 2009 lows may be possible. A very similar picture can be seen in the US Ten Year which has stalled at its contract gap close. Its pivotal support lies at 116.30 with the 50% level at 116.210.
This week we will see the ECB rate decision announced followed by President Trichet’s press conference. This month there will be a shift in traders focus away from hints towards monetary tightening and towards ECB’s stance on the Greece situation and the risk it poses. It is likely that Trichet will avoid shocking the market but any talk of problems spreading into peripheral countries will provide volatility and most likely a bid in the Bund.
The BOE also announce rates this week but with no change expected all the focus will be on the QE programme. The current discussion following a relatively weak recent GDP number is whether we will see an extension to the current £200 billion programme. At the moment this appears unlikely but we do expect the MPC to leave the door open for a future expansion. A failure to do so would most likely catch the Gilt off guard and result in some short term selling pressure.
Important events this week.
• Tuesday: Pending Home Sales US
• Wednesday: ADP Employment Change, ISM Non-Manufacturing US
• Thursday: BOE, ECB Rate Announcements
• Friday: Non-farm Payrolls US
(extracts taken from futex news)
Subscribe to:
Post Comments (Atom)
Front month WTI Futures plunges to negative $37 as storage costs rocket
It was a move of epic proportions in the front month WTI Crude futures, the significance of which is not really known of yet, but was incre...
-
Much has been said about the new phone and the response on the surface seems exactly how you would expect it to be. Regardless of what Appl...
-
In the previous ECB meeting we had a split decision on whether to cut rates further or not but today Mario Draghi said the council decided ...
-
With the raft of poor data out this morning, we got some strong selling pressure in all parts of the curve. The 2s-10s spread hit an all tim...
I agree with you. But I think the risk/reward ratio goes for steepeners, especially for the ed. I'm thinking of entering a steepener position in the ed in advance of the payroll data. Despite negative benchmark adjustments (birth/death ratio etc) I think the risk is a positive surprise in payrolls. The futures curve is very flat so a negative number shouldn't have such a great impact as very positive number. In addition I think we'll see beter macro data in the next weeks because of strong base effects (inflation, employment etc). I'm not sure if the market is looking through these things.
ReplyDelete