As worries about Cyprus continues and the possible knock on effect on the rest of Europe we have seen the type of trade which was common in 2007/2008 where we had a flattening Yield Curve, and at the current pace it could even become inverted!
Currently we have the Bunds up 64 ticks for the day and Mar14 Euribor down 1/2 tick and on its lows.
Spreads have continued to come off and are on lows that I haven't seen yet for this cycle. I continue to buy into this, but very cautiously as it doesn't look like letting up at the moment.
What the main risk is whether the credit grade of Euribor will worsen, and if so we will see the front months get hit quite a lot as Inter bank lending can dry up on the sign of loss of confidence within Banks.
With a four day weekend coming up in Europe, I suspect something big will be announced over the weekend.
We shall see!
Currently we have the Bunds up 64 ticks for the day and Mar14 Euribor down 1/2 tick and on its lows.
Spreads have continued to come off and are on lows that I haven't seen yet for this cycle. I continue to buy into this, but very cautiously as it doesn't look like letting up at the moment.
What the main risk is whether the credit grade of Euribor will worsen, and if so we will see the front months get hit quite a lot as Inter bank lending can dry up on the sign of loss of confidence within Banks.
With a four day weekend coming up in Europe, I suspect something big will be announced over the weekend.
We shall see!
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