Strong UK Sales numbers push up Cable, Gilts and Short Sterling Drop

Its been a quiet week in the STIR space to put it kindly, but with this massive beat in UK retail sales we had a very nice move down in Short Sterling, and a 100 pip move up in Cable. I didn't catch the move down in Short sterling outright, but I used the down move as an opportunity to get out the long Spreads I had been holding for four days and initiate more shorts on the move up, as it reached the top of the range. I had mainly focused on Shorting the Mar15Jun15 Spread at 20s, where I was able to short a few, and then used the inevitable fade to get out at 19s, so worked out nice.

The big beat puts the likelihood of the UK acting first in terms of rates a more real possibility, and so it is likely that these Spreads will remain at these levels if not edge higher providing data continues to come in strong.

On a separate note, below is a chart of Short Sterling and Cable:

You can see in Cable a 30 tick move up in the 25 minutes before the data was due, something tells me, as usual someone had the number, as always. I was tempted to go long into it on the back of it, but backed out unfortunately.
Despite this Short Sterling Spreads have reverted back to levels prior to the data, so looking for an opportunity to go long again.

Euro Algo gone wrong!

In what has been a super boring morning, my main highlight has been watching a Euro Algo going berserk with a 2 lot buying and selling at market for over 10 minutes accumulating to over 10000 lots at least. That works out to a 250k loss at my guess.
Watch some of it here:

Draghi maintains Easy Policy Stance

So there was not much change in yesterdays rate meeting, other then being more stern with his words stressing, there is much the ECB can still do. So while the FED and BoE are looking to ease back the ECB is looking to do more, and this as you would expect gave a bid to Euribors and European Bonds, and Spreads flattened, however it didn't really last long as we came back up the spreads to pre ECB meeting levels, which gave a nice buying opportunity on the dip. The action wasn't too volatile, with the move up on the initial comments the main opportunity, as you can see below in the Euribor Dec15 Contract:

The main focus however is as always Non Farm Payrolls, a good number would almost guarantee more tapering in the next FED meeting, however a bad one would push treasury Yield lower and smack the Dollar in the process as well. ADP private payroll number forcasted a 238k increase, which was 40k more then expectations, so with that in mind, it is very possible we can see an number well above 220k.

Hoping for some good action!

Euribor Spreads Tank after Run up

Yesterday was quite lively in the Euribor Space, unlike today mind you which is dead as anything. Off the open we had a spike down, and I happened to get caught quite bad as I had bids below, ended up hedging my longs in Sep15, Dec15,Mar16 and Jun16 going short a bunch of Dec14s and Mar15s, which at the time gave me the chance to get out for a respectable loss rather then taking the 2 to 3 tick loss I would have had I not spreaded it up.
However we had the mother of all pullbacks in the Spreads, as you see below (Mar15-Mar16), and astonishingly manged to get out for a profit, and had I held would have been up over 2k, but hind site is a wonderful thing.

The run up in my opinion seemed to be well over done, especially in Euribors as Europe seem to be far away in terms of economic numbers then the UK and US, and so the rise in the Yields of the UK and US was much more understandable, and the Euribor Yield rise was more in sympathy then anything else. So my bias was to short it no matter what, but luckily despite a very bad entry, in the region of 48-49s, I still managed to bank a little.

Today is just a write off as there is no volume, and the real action hopefully begins next week, with Non Farm, ECB and UK rate decisions along with a raft of other data.

End of Year Thoughts - 2013

Its the last trading day of the Year, and I still have a position on in Short Sterling. This sums up the last few months, where the volume has totally dried up and its been hard to get out of anything. In the last 2 weeks we have seen a big steepening trade at the front of the Short Sterling curve, with Dec14Mar15 spreads moving from 13 to 20!, Sep14Dec14 moving from 5/6s to 13s. I can imagine alot of people getting jammed in that spread as I was, as I had been short from 14s upwards. It was a bit of a stealth move, but I kept hold on to this trade, adding more on when it went up, and finally got out 17s.
Is this a sign of thing to come for 2014?

It looks like now that Stocks and Bonds are going to move the way they should going forward if the past couple of weeks is anything to go by. Despite 10 Year Yields reaching 3%, and a sharp steepening in the Yield Curve, we still have seen this mother of all rallies in the stock market. This market may have gone up largely due to the massive amounts pumped in by the FED, but it doesn't seem to be coming down, as tapering begins, in fact since they announced the taper, everything has blasted through highs.

Looking to next year, I think the Bank of England will have the highest probability of a  rate rise, which will likely be towards the end of the year, as I expect inflation to heat up again, and the consumer seems quite buoyant, and I think in Europe, rates will stay low, and it will be remain the lagging economy. However although data will show improvement, this still seems to me a two tier economy, where the wealthy are distorting to overall true picture of health of the economy. Most people are still struggling to pay the bills, where as the rise in asset prices are helping the rich, so with this is mind, I think action by central banks will remain muted, and we will be met with cautious tones through out the year. This will lead to further rallying Stocks, and asset prices in general as yield hunters come out in full force, but it would be sensible to think it will not be as it was this year, where Stocks rally in a straight line with hardly any pullback. At some point I am expecting a 10% pullback at least, the real question is how quickly will any pullback be snapped up by bargain hunters!

Personally next year my goal, is to lump on more size if the opportunity presents its self and be more involved with Energy and Agricultural spreads, in general my trading has been good, but my main problem this year was not maximizing the good opportunities. You have to play with conviction and confidence, when the market conditions are to your liking to offset the slow times when your trying to scrape by. At the end of the Year, if you are still in this game you have done well. I remember when I started out trading, the numbers of prop traders were huge, however they have whittled down alot, and the number of prop shops have halved as well. At this years Trading Technologies Xmas party, I see some of the same old faces, which are those who have managed to steer there way through this market for many years, but for alot of newbies (and experienced traders), its been tough, and to consistently make money has been tough.

Despite this, the opportunities are there, just harder to find, and not as obvious, hoping still to have a great year ahead, and hope to be helping others along the way!

FED Tapers, but its business as Usual for Stocks

The big event last week ended up in a somewhat surprise, with the FED tapering finally, after a raft of good news suggesting this was the best thing to do. Stocks rallied as Bernanke re iterated that rates will remain low, and Tapering will only be gradually done, and that they would increase QE if the economy warrants it.
The reaction was surprising, not because it went up, but the way it went up, the rally was like there was a 2 hour Sale in stocks, and its was getting bought up like there was no tomorrow. This rally continued through Friday, and today it looks like we going up again. The DAX has been on steroids, with the index hitting new all time highs, and rallying over 5% from the level on Monday last week.
One thing that has reacted normally is the gradual rising in Spreads, Eurodollar and Euribor have seen a gradual steepening, however Short Sterling, front end is steepening very quickly, and has caught me off guard.
The Dec14Mar15 Spread has gone from 12 pre taper to 17/18. Clearly futures are pricing in a 2014 rate rise, but for my sake I hope we get some sort of a pullback soon, as Short Sterling Spreads have risen much more then Euribor and Eurodollar in the front end.
Looking forward, its likely that we are going to continue to rally in Stocks, and see some exaggerated moves in other futures contracts as volume is super light as you would expect. I will be keeping an eye on the market but wont be trading much, and instead take some time off and prepare for what I hope is a good 2014.

In general, this year has been OK, there has been times of nice volatility coupled with times of utter boredom. I hope next year there will be some more volume in the markets, as it seems the back end of this year has been very quiet. Also with the introduction to the new Nasdaq NLX market, it will be interesting to see how the Euribor and Short Sterling contracts trade on there, as they are getting a bit more market share.
Could be some good opps looking at both exchanges.

Volumes Drop Off a Cliff as Year End Approaches

Its been pretty slim pickings as of late, especially in Bond markets and Spreads. Bunds as of now only traded 124k lots, Euribor spreads, aren't moving, and Short Sterling has seemed as if the market has been shut the past week. Been stuck in a small spread for a week now, and it hasn't looked close to giving me an out.
If there is going to be any action it will be in the Equity space, which traditionally at this time of the year move up as the end of year window dressing will come into force. The small pullback we have had in the past two weeks will give more impetus for the train to continue its ride. The only thing that can derail this in my opinion is something unexpected from the FED on Wednesday or, budget disagreements in the US.

Wednesday however is likely to be a pretty big day, as there some calls for early tapering, which is warranted in my opinion since data has been better, and also the fact that is it really necessary to maintain 85 BILLION $s worth of purchases a month at this time, 5 years after the crisis, I think not. Personally I think the FED will choke and maintain need for extra stimulus for months ahead, but I hope I'm wrong. Either way this is likely to be the last main event of the year, so praying for some good moves!