Euribor spreads have fallen in the front end as it is almost certain rates are going to remain low for some to to come. As Dec09 Euribor comes closer to expiry the spread between Dec09 and Mar10 will likely continue to fall until it is at parity or negative. The dec-march spread is trading at 6.5s falling from low teens last week as Euribors continue there march upwards.
Short sterling paints a similar picture, as the bank of englands decision to keep the possibility of further quantitative easing open has kept short sterling bid. Coupled with the fact the UK is still in a recession suggests that rates are going to remain low for a long time still. Front month short sterling Dec-Mar spread has come off 5 ticks from last week as we trade 11s. It is also likely this spread will continue to come as we reach closer to Dec Short sterling expiry.
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