The monster rally we have had in equities and the Euro on the back of comments out of the ECB that they will do whatever is necessary has put the market in a position where any disappointment will smack everything back down again.
Hopes that some type of European solution will come out of the ECB meeting on Thursday is spurring the markets with talks of a further rate cut, another LTRO program, or even Quantitative easing.
As far as the Spreads go we have pushed up along the curve, with Sep13Dec13 trading at 6s after being at 5s, Mr14jun14 trading as high as 7.5s after trading 5.5s/ 6s a week back. We are starting to fade these moves slightly, but in reality I dont see any other outcome then a full fade eventually as I dont think there can be a sustainable solution to this problem, despite these short term solutions. I have been trying to go short on any move up, and so far this has been working, but I will be wary of this after the ECB meeting if comments are positive for the Euro zone.
With the ECB on Thursday, the FED on Wednesday and US Non Farm Payrolls on Friday, we are set for a bumper week and potentially alot of volatility.
Fingers crosed!
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