The Euribor curve continues its flattening as European economic woes continue, recent comments out of Hungary stating that they are at risk of default further put pressure on the Euro and put a bid to the bond markets. Euribor spreads have been narrowing as the back end has been bought up and the front end has been sold off as Libor rates continue to rise as a result front month spreads are edging closer to zero.
June Schatz traded above 110 and Bunds were in touching distance of the 130 level, which mathematically seems to make no sense, but investors are pouring in into safer government assets as risk appetite is dwindling.
Looking forward, it seems that the fear of spiralling debt levels will continue to keep this market on edge. We likely to see continued volatility to day to day changes in news and country situations, as well as continuing changes in debt ratings for European countries.
I continue to only keep intra day positions and be flat over night as overnight risk remains high.
Tuesday, 8 June 2010
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