Who ever trades the short end would have seen today the mental open in the Euribor. We opened up and had 9k lots push the euribor down 10 prices in one swoop before it retraced. Ended up being a brutal day for me as I got filled all my longs and had to scramble to spread it all up at very bad prices. Ended up short over 60 lots and managed to reduce the loss to 1/2 tick which wasn't as bad considering I was down over 2 fat ticks at one point. The reason I presume is some repositioning or dumping of positions after the more upbeat FOMC statement yesterday.
As bad as it was maybe this could be the start of some volatility in the Short end. Volumes are way up almost 4 times more then usual at this time of the day.
We seem to have stabilised now but will be watching closely which way these spreads go when the US opens, I still favour shorts, because regardless of the more upbeat statement there is no sign of rate rises in the short to medium term so think these spreads will come back down again.
We may also get more ensuing volatility from the futures and options expiries this week so bear this in mind.
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