ECB Leaves Rates Unanimously on Hold

In the previous ECB meeting we had a split decision on whether to cut rates further or not but today Mario Draghi said the council decided to leave rates on hold unanimously. This brought about a sell of in fixed income products, with the Bund dropping 20 ticks in the minute of the announcement  and Euribors falling 6 prices, along with some very nice volatility, which made it easier to leg in and out of spreads.

Although the spread prices didn't move that much, there was plenty of opportunity to get good shorts on to then cover them for the half tick. 

I sold 99.70 in Mar14 on the back of the comment, but as it didn't go down straight away I only took 1/2 tick which really left a sour taste in the mouth as it was trading at 99.66 a minute later. It was bad trading on my part, but I'm sure there are those who managed to hold on and make a nice amount on that down move.

That was the main real moment of interest in the meeting, the rest was all the usual chatter.

Looking to tomorrow hopefully we get some follow through in the morning, but with not much data coming out its likely that it will be a quiet one afterwards.

More Volume More Action

Its early days yet but the volume in STIRS over the first few days of this year has increased dramatically. It has helped getting filled a massive amount, and although I'm not making the money I used to, its still fun to trade. I have averaged 150 lots over the past 4 days which is significantly higher then what I was doing last year.
I guess its a new year, and new impetus, from fiscal cliff to debt ceiling. It all works out well anyways.
The big hope is that this remains, now if we continue to get better job numbers out of the US this will in turn start speculation on whether the FED will continue to be so accommodating. This in turn as you would expect will lead to new money flowing into STIRs as rate speculation will rise.

In terms of trading I have been shorting into this rally we have had in Euribor spreads, and since the first couple of days we have pretty much retraced back the whole move. In Short Sterling I'm still short, but hoping I can scratch out soon as this clearly didn't go as well... But hey at least its moving!

End of Year Review

To say this has been a tough year has been an understatement. I have made 40% of what I did last year, which was disappointing but you have to take the positives out of it and hope it will be better next year.
When looking back the main issue really was lack of volume. Due to various factors including the decline of MF Global and PFG best, confidence in the market isn't what it once was and hence more people staying on the sidelines and have there money in safe investments rather then be in the market. This is a shame really but a reality. I can only hope the regulators get there act together to stop scandal mania happening as frequently in the future.

As far as the markets are concerned, with the pledge of low rates for multiple years and a generally sluggish economy, have seen Bond yields remain at record low yields for the best part of the year, coupled with rising equity prices which goes against the conventional correlation but with no return to be found in other asset classes, it was inevitable that money going into stocks was the best bet.
With spreads, as you would expect has been in a super tight range, which has made it easily predictable  but the low volume environment has meant that its been a slow trade, with multi day holds being the new day trading!
Also with the low rate environment reaction to data has been very mute, so news trading has been quite tough as well.

Looking to next year, I certainly have more optimism, as the FED has pinned a target on the employment rate at which it would consider moving on rates. This would give the market a focus, and so any good news will more likely to have a better reaction. I also feel we mite get more volume next year also as on the face of this year, the gains in equities would have made people feel they have missed out. Secondly if we have better data we mite incur more speculation on rate movement which should bring people in from the sidelines and lastly, I cant imagine it to be as bad as this year so by default it should be better!

For my own personal trading, I will aim to be a bit more bold as this year I was quite defensive. Trade with more size, and really give it a go. Ill keep you informed on how it goes!

Happy New Year and best of luck for next year!

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.