Wednesday, 2 May 2012
Spreads Fall as Bunds break 141
We have seen a sell off to the low of the ranges amongst the Euribor curve as the Bund first broke 141, and now is close to testing 142, as poor PMI numbers out of Europe as well as a poor ADP report out of the US lead to more safe haven buying.
The Dow is trading at 4 year highs as is the Bund, which is being fuelled by cheap money. This in theory can continue until monetary stance changes, but it seems as though there is more likely to be further easing rather then tightening out of the US, which could fuel this rally more.
After being off the past week, I have entered today long 3.5s/4s in Mar13 Jun13, Im looking to go long 4.5 in Jun13Sep13 too as this has been a solid level in this spread over the past few months.
We have alot to look forward to this week, with the ECB rate meeting tomorrow as well as NFP on friday. Hopefully this will dish out some good volatility.
Bunds now look well and truly bid, and it has broken the trend of retracing 100 ticks on the last move up in the mid 140s, which was inevitable eventually. With yields now at 1.6% we are reaching Japan yield levels, and so any good news I think can trigger 100 point sell of at least in this Bund, although i think we will stay above 140 in the near term.
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Do you ever seen the 166 lot guy in the spreads when it's choice?
ReplyDeleteWhich spread Doug?
ReplyDeleteIn the euribor calendar spreads usually around the mar14jun14 or sep14dec14 part of the curve keep an eye out.. you'll notice him hovering about the spreads making a price when its choice. No real reason for the question, just curiosity haha
ReplyDeleteKeep up the good work.