After a barrage of selling and ultra high yields in government bonds, we have had some respite with a big rally in stocks yesterday on the back of hopes of a coordinated action to help eurozone nations.
This lead to a 200 point plus sell of in the Bund, and spreads especially the front months have come of lows.
We have Jun13Sep13 Euribor spread trading at 3s/3.5s after being at 1s two days ago. This move havs been a big one, but it is now at resistance levels, so a sell at 3.5s and 4s would be a good bet so will be looking for that opportunity.
Short sterling wise, we have come up slight in spreads too, but with the BoE rate decision minutes away, and with a slight possibility of QE it is prudent to stay on the sideline till that decision has been taken, and assess the situation then. QE would be unlikely, but the Bank of England have been known to surprise before, but with there previous worries over inflation, likelihood is low.
Looking forward, we likely to be trading on the word as has been the case lately, as rumours about possible bailouts and continue, although nothing concrete has been set yet. This will continue to be the theme, and we also have Bernankes speech at 3pm UK time, which will be closely watched, any hint at more QE from the US could bring about some volatility too.
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