Yesterday was a very difficult day trading the Euribors, with all kinds of action happening along the curve. After being long the mar12-jun12 contracts and seeing that drift lower on monday I was looking for any decent exit yesterday which I managed to get at 17, the front end remained bid throughout the day and traded as high as 18 although it was hard to get. Seeing weakness in the back end I went long dec12-mar13, at 10.5s, that then went to 10s then 9.5s, luckily I managed to take a small loss by getting out 10s as it is now trading 9s. So it was a case of spreads up in the front and down at the back, difficult to trade, as usually you don't have such diversion along the curve.
A lot of this is due to continued ECB comments, warning on inflation, and if we hear“Strong vigilance”, “Heightened alertness”.
Either of these phrases at Thursday’s ECB press conference (which
starts at 1.30pm London time next thrusday) then brace yourself for an early interest rate rise. The reality is you won’t — the earliest this language might appear is July, reckons
Nick Matthews, senior European economist at Royal Bank of Scotland.But given the rise in eurozone inflation and the hawkish noises from President
Jean-Claude Trichet, ECB language is back in focus.
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