Non Farm payrolls surprises everyone!

A 61k beat on consensus and a drop in the unemployment rate of 7.7% below the expected 7.9% provided a surprise boost to the markets, as the effects of hurricane Sandy didn't impact the payrolls as much as many had expected.
The Bund fell 25 points of the data, with the S&P up 9 fat ticks on the back of the data. We did however fade this however, and the Bund along with Euribors surged higher on the back of a possible negative deposit rate from the ECB, this was later quashed by ECB officials, but the fact it was discussed in this month ECB meetings has put the possibility on the table.
Spreads continue to narrow, and are at low putting a squeeze on players long the spread, myself included.
I personally will continue to average, hoping for a small bounce to get out again.
There has certainly been alot more volume over the past week so hoping it continues, as its made trading that slight bit easier, if there is such a thing.
Hoping for more of the same next week!

Spain request formal bank bailout!

Spain makes formal request for EU bank bailout funds, expects fund for bank recapitalization around Dec 12th. They confirm request for 37 Billion Euros for 4 banks.

On the back of this we had a spike to the downside int he Bund of 30 pips before retracing on the back of heavy volume. As this wasn't a country bailout, more it was a Bank bailout, is why we haven't seen much more of an initial down move.

The move was well timed as it helped me get out of my long Euribor Spread positions, which I was holding for ages!

Market Analysis

A look at the market action, largely dominated by fiscal cliff concerns, as conflicting reports on whether there will be some sort of resolution looms. Personally I think it will be sorted cause they simply cant afford to not let it work.

Market Turn on hope of Fiscal Cliff solution

So the past couple of weeks we been selling off on the back off fears that there wouldn't be a resolution to the fiscal cliff issue and yesterday we have a massive rally cause all of a sudden we might get a resolution! That's why you got to love this market.
We pushed up big in equities across the globe, with 1-3% gains all over.
Bunds have pushed below 143 after the big run up, and now we seem to have consolidated below this mark, despite a French downgrade.

On the spread front, it has got to be the worst conditions I've seen in my time trading. The volume in Euribor and Short Sterling has been lower then in the Christmas periods of past years, and with ranges of 2-4 ticks in recent days has made day trading this extremely difficult. The strategy now seems to be to pick the right levels and hold on till it moves.
We were at the bottom of the range in Euribor across all pairs, with 6s available in Mar14Jun14, 6s also there in Jun14Sep14, which were notable buys at the bottom of the range. You would have had to hold for a good few days before finally getting some profit out of it.
I do really hope something kicks off in the short end soon as its a non mover at the moment.
Looking forward, we have US Thanks Giving holiday on Thursday, which is likely to depress volumes further so maybe next week we might have a bit more participants to the market.

Euribor spreads push up on the back of European optimism

After trading in a very narrow range, with hardly any volume, we broke up in these Euribor Spreads, with no real pull back on the way up. Jun14 Sep14 went from 6.5s to 8.5s, Sep14Dec14 went from 7s to 9s, and pretty much we had a 4 tick price movement along the mid part of the curve.
Now looking at a longer chart, it looks like a perfect trade, being long the bottom of the range, and now watching it push up. But as a day trader, with such a narrow range in the past week I have been inclined to sell it, and this got me in trouble as I had to average aggressively as it went up.
Thankfully we had a rally in the Bund today, after the large drop yesterday and this gave me my out in these spreads. In all ended up being a very roundtrip intensive day but its a nice change to see some action in the short end as its been dead recently.

Else where, as I thought last week this Bund has come off the channel at 141.50s and has pretty much gone down 200 ticks since, on the back of positive news from Europe and upbeat data from the US, including a positive Philly Fed report, all conveniently before the US elections. Its still up in the air who will win the election but I still think we will get good data out, but with the Bund in a range between 139-142, so I think we are likely to push up mid range sooner then we go down.

Not much more data out for the week, so the market will be dictated by Earnings, and the usual remarks out of EU officials.

Non Farm after thought

Well I said it in the last post that the way it was looking we would get a good non farm, but not in the way I would have thought. Rather then a good amount of jobs added we had a dramatic reduction in the unemployment rate from 8.1% to 7.8%. It is very timely actually but it lead to some volatility initially before it all faded before the close of the US session.
Theres no disguising that there is still a lot of problems, and with the run in to the US elections I wouldn't be surprised to see more and more good data, to give the President a boost, before the Americans go to the polls.
So going forward I would expect to see some pressure on the Bund, unless we have any major announcements out of the EU.
Spreads are very slow and static at the moment so best to wait for good levels and hold until it comes your way.
Other then that not much else to report.

Upbeat data points to a good jobs number?

A strong ISM manufacturing and ISM Non-Manufacturing coupled with a slightly stronger ADP reading bodes well for a potential upside surprise in this Fridays non farm payroll number. Although there has been discrepancies in the past between ADP and NON farm, I got a feeling we are going to get a good number this Friday, which coincides with the run in to the presidential elections...hmm conspiracy theorist say what you will!
Thus we have maintained these near high levels in the equity markets as Europe isn't creating many new headlines, so in that aspect there is no real reason to go down, and when ever we do we simply seem to be brushing it off.
Although I do feel we will come off cause the market doesn't represent the current state of the economy, near term I think we will continue higher.
STIRS have been fairly static lately, with low volatility meaning having to hold on to spreads for much long then usual. As the Bund keeps on rising, spreads have been gradually coming off, and as they're coming near the bottom of the range, (on many 3 months spreads) I've been inclined to buy them. Sep13Dec13s at 4.5 is a level which has held strong before so have been trying to load up on this as it comes.
Tomorrow we have ECB press conference, but this is likely to be a non event as the main actions were taken last month, but any surprise announcement will be welcome.