Geopolitical turmoil has this market on edge as Bond Yields have dropped sharply and Equities have followed suit. When both markets were going up, you knew that one had to be mispriced, and usually the Bond market is pretty good at pricing what the market is really thinking. The Bund hit a record high of 149.83 today after being 200 points lower only two days earlier. This caught me out by surprise, and I ended up taking a bit of a hit trying to short it. I guess yield doesn't make any difference right now, since they buying these 1% yielding bonds as if its the best thing since sliced bread!
There is a key difference in this market and those of a few years back, that is that a rise in volatility has lead to a rise in trading volume, especially in Bonds. In these conditions the market gave the best opportunities 5 years back, but in this case its the opposite. During the ECB press conference yesterday, probably 3k contracts got traded from Jun15 to Dec16 in 45 minutes plus, which needless to say is un tradable.
With weak data out of Germany and Italy, it seems like the Euro area will be depressed for a while longer.
My trade short ES had worked out well, but I got out a bit early, and my trade in Bunds was initially a scratch then, I reentered and had to take a hit, although the path of least resistance seems up, I think risk/reward wise, with Yields where they are I feel more comfortable having a downward bias to the Bund.
Looking to next week, the main event is the BoE Inflation report. Hopefully this will move Short Sterling alot and give some opps.
Finally an Update on the 30 Yr Bond Strategy. Its been a pretty tough couple of days with the one way action of the Bond market which has resulted in a draw down the past week, but over the longer term its still positive, so i'll continue to monitor it. Generally the trade wouldn't take place before Non Farm payrolls, but for curiousity it was done on a demo account.
There is a key difference in this market and those of a few years back, that is that a rise in volatility has lead to a rise in trading volume, especially in Bonds. In these conditions the market gave the best opportunities 5 years back, but in this case its the opposite. During the ECB press conference yesterday, probably 3k contracts got traded from Jun15 to Dec16 in 45 minutes plus, which needless to say is un tradable.
With weak data out of Germany and Italy, it seems like the Euro area will be depressed for a while longer.
My trade short ES had worked out well, but I got out a bit early, and my trade in Bunds was initially a scratch then, I reentered and had to take a hit, although the path of least resistance seems up, I think risk/reward wise, with Yields where they are I feel more comfortable having a downward bias to the Bund.
Looking to next week, the main event is the BoE Inflation report. Hopefully this will move Short Sterling alot and give some opps.
Finally an Update on the 30 Yr Bond Strategy. Its been a pretty tough couple of days with the one way action of the Bond market which has resulted in a draw down the past week, but over the longer term its still positive, so i'll continue to monitor it. Generally the trade wouldn't take place before Non Farm payrolls, but for curiousity it was done on a demo account.
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