Bund nears 140 as Yield Curve Flattens

Given the extreme volatility of last week this week has been a bit dry, and the worst conditions to trade especially for STIR spreads. Why? Well we have come off pretty much 1.5 to 2 fat ticks along each 3 month spread, and it has happened in a slow painful way. There hasn't been much opportunity to get out, you just watch yourself going further offside in a painful way.
So I have been going long the whole curve and have been averaging pretty much every price, which has put me in a tough spot, but luckily just now i have managed to leg out of 40% of my spread, so my risk has been reduced quite a bit which is pleasing, so now Im waiting the rest out.
I'm long 6.5 and 7s in Sep14Dec14, long 8s, 8.5 and 9s in Dec14Mar14, Long, 9.5s and 10s in Mar15Jun15, and Long 10.5 and 11s in Jun15Sep15.
I think we have come off a bit fast, and long is still the way to go, so Im willing to add more on should it continue to go down.
Hopefully we get a nice pop up, as Bunds have retreated from the 140 level.

Yield Curve Analysis

A video looking at the Bund, Euribor and Short Sterling.

UK Employment data is good, but someone had it early!

Cable popped to over 1.58 today on the back of better employment data out of the UK. Calimant Count Change reduced by 32.6k against expectation of a reduction of 21.2k. Employment rate went down one notch to 7.7 from 7.8. This lead to an initial push up in the Yield curve as you would expect as Spreads pushed up, before fading the move which provided a great opportunity to get out my shorts. Short Sterling Yields have pushed up massively since the BoE inflation report and I think it should start slowing down here, as the BoE still insist no rate rises are immanent.

As for the action in Cable, there was a gradual uptrend the whole morning and minutes before the news, over 1000 lots pushed the price up over 20 ticks, and then we had another 60 tick move on the actual data. Looks like Christmas had come early to someone as it seems to have been leaked, which is often the case with data these days.

It has been very quiet otherwise this week as far as volumes go, and it is the case like I said before about the FED meeting next week, so until then pick up what ever you can in this market, and don't push it too much.

Spreads Retreat on the back of worse NFP data

There was a slight miss in August NFP which pushed Bond Yields down and pushed down these Spreads slightly off lofty levels. There was some good action today as there was a good range in these Euribors and Short Sterling, with a slight downward bias, yet there remains a strong underpinning for higher rates.
This data wasn't strong enough or weak enough to really sway any decision the FED may have already had on the table, so I think what ever they had planned for September will still happen, whether that be tapering or, holding back till later on in the year.
Into the mix today was the news that the Russians would support Syria in the face of any military, this pushed Stocks down and Bonds up, and added extra spice to this market.
This Syria situation is going to be a major talking point for weeks to come as it seems likely the US will attack, and we know the Markets don't like that.
Looking forward its now all about the FOMC meeting mid September, and until then we will have alot of speculative trading, as traders position themselves before the number. This will be the main focal point, and so each piece of data coming out will be closely looked at coming up the meeting. So worth keeping an eye out for them all. I think we will now range in these Spreads until there is significant data to push it into new territory, so ill be looking to scalp as I did today, after yesterdays big steepening.
Next week is a pretty light week in terms of data, we have retail sales on Friday, but other then that not much else out so much of the move will be dictated by ongoing Syria talk and FED talk.

Markets Await Central Bank Actions

Falling Bond Prices and rising Yields has lead to steepening in the Yield curve suggesting rates are going to rise sooner rather then later.
Euribor, Short Sterling and Eurodollar Spreads have pushed up in the past few weeks as continued good data has put pressure on Bond Prices.
I have been away for the past couple of weeks so, normally I would be looking to short this all across the curve. But with ECB and Bank of England rates being announced tomorrow, I'm looking to slowly ease into it and see what comes out from the BoE and ECB, before taking further action. We also have ADP, followed by the all important Non Farm payrolls on Friday, which will be a key number in determining what the FED will do when they meet mid September.
Either way this all leads to a potentially volatile month, so this should provide good opportunities to make some profitable trades.
I will update on Friday, hopefully some good trading opps!

Yield Curve Steepening in anticipation of the FED

The last week has been pretty quiet, volumes have dropped across the board and I pretty much thought this is it for august everyone has gone home. However yesterday afternoon we some volume return with a sharp Steepening trade across the Bond space, after better then expected ZEW data out of Germany and slightly better retail sales have some to believe that tapering is all but confirmed in Sep, although personally I think could happen slightly later.
Either way we had a push down in Bond markets with Bunds back below 141, and Euribor and Short Sterling Spreads pushing up. As per usual I was selling into it, as the front end and red months 3 month Spreads were pushing higher, and the back end of the red months and Green months were staying put. Although it wasn't easy managed to make a small bit from it, as I shorted 7.5 and 8s in Sep14Dec14 and managed to get out at 7.5s, I also shorted quite a few 12.5s in Sep15Dec15 and took the half tick on that also. This morning I've gone long 12s as the front end looks very bid and so hoping for some follow through in this Spread.
Looking forward we have BoE minutes which will be the highlight of today, so hoping for some movement of that, and tomorrow we have UK retail sales and CPI data out of the US. Volume will remain light and i dont think it will really pick up till September now so we are likely to only see pockets of action, as well as low volume manipulation.
Have been seeing some big spikes in the Dax, and a big spike in cable yesterday which was exaggerated by the low volume so its worth being careful on limit orders, as its always tougher to trade in this type of environment.

All eyes on September

As we are into August, volumes have dropped of a cliff, but data has been coming out strong all over. PMI data has come in strong for all regions as well as factory orders in Germany and so this all points to an improving macro economic picture, which leads us to the question, what will the FED do in the September rate meeting. It is inevitable that Augusts Non Farm Payrolls will have a massive effect on whether or not they will start tapering their Bond buys, and so this report will no doubt bring huge volatility with it, which is good!
Personally I hope they start tapering as this would bring back a lot of volume, and starting making these STIR trades very interesting.
We have been ranging now since the initial move back in June, and its been a matter of picking the ranges. Its been quite difficult because volume has dropped off and its easy to be drawn into shorting too early when it is flat lining, to then be offside, and needing to average.
The main event today is the UK Inflation Report, this hopefully will be a good one as its the first meeting for the new BoE Governor, and hence mite bring about some good opportunities.
The pattern of late has been that Spreads have been dragged up from potential FED tapering, then smacked back down as Europe and UK maintain there still in full accomodative mode. So if something changes in the latter, we could have a new leg higher.
Looking forward there's not much to look forward to as we enter the heart of August, and most big players are away, this is like to lead to more volatility in Equities as it is likely to be much thinner so more easily manipulated. So hopefully September delivers.