Bund back near top of range

Bunds are pushing to the top of its 123-124.50 range trading right now at 124.11, after failing to push further below 123. Bonds in general all shot up as stock markets around the world sold off, after auto maker plans got rejected. To be honest its about time, they put a hold on their printing presses as the government cant bail out the world. The stock drop was expected after such a sharp run up. Problems havent gone away, some pullback was expected, and i think we still have some way to go.
Whilst bunds are outperforming shorter dated bonds, Euribor spreads however are still rising. The Sep10-Dec10 euribor spread has shot up to a high of 29, I cant see it going much higher then that, and I am still willing to keep shorting it all the way up as I believe we will pullback a few ticks soon. Time will tell. I like trading the Mar11-Jun11 spread right now as its been ranging from 20-21 for a couple of days. Liquidity is low though, but if you can get filled, the range is very good to play, and is proving to be quite profitable at the moment.
The rest of the week should be very interesting, with ECB, Non Farm and G20. Lets just hope we don't get riots on the streets, cause that's the last thing we need.

Bonds sell off as Euribor spreads continue to rise

As the market opened we saw bonds selling off, with the Bund hitting 122.60 in early trading. I was somewhat surprised to see the long end sell of in Euribors soo aggressively, with spreads moving upwards fast along the curve. In the Jun10-Sep10 spread, I went short the previous high of 22.5 to then see it go up to 23, then 23.5. I added a bit more at 23.5 before managed to be small up on the pullback. Further down the curve the Dec10-Mar11 spread initially fell, to 18s from 19s before then going up to 20s. Longer end euribors sold off much more relative to front months as the market is expecting the ECB to continue cutting rates in the short term.
Bonds actually reversed as the day went on, and continued its disconnect with equities as the Bund finished close to the high of the day along with equities.
Tech shares fueled the gains for stocks, with the Nasdaq now flat for 2009. GM paced the Dow Jones with a 14% rise. Apparently they are likely to be given another life line, in my opinion the whole structure and management have to change to change the fortunes for GM. We are in a changing world, and they have been one of the slowest to react to the change, i'll be surpised if they manage the turn around, but we can hope!
Have Stocks risen too far too fast? Well with GDP US final at -6.3% and no real signs of things improving, even though they haven't got any worse, its hard not to see another shot to the downside.

Stocks trading wildly.

A relatively quiet day in the bond market compared to recent days. Bunds bounced between positive and negative territory the whole day before settling at 122.88. It wouldn't be surprising if we got some consolidation before we start making the next move.
Euribor spreads held well today, staying nicely in a range for most of the day. I still kept my bias to the short side, shorting along the curve as we remained at short term highs along the red and green month spreads. Going forward I wouldn't expect any big moves in the spreads until we come closer to the ECB rate decision next Thursday and the American job numbers, which will be the latest indication on where we stand.
Stocks had a wild day today, the Dow opened up higher before turning south throughout the day, before shooting up over 200 points towards the close. Such volatility normally is a bearish sign. Financials were the main push towards the close of the session with some wild swings in the big names towards the close. The XLF(financial index) rose almsot 10% in the last hour of trading. This type of action isn't to surprising at this moment as we have those taking profits from the huge run up, and those wanting to initiate positions feeling it is a good pullback to get in. Only time will tell, I still favour downside. Below is a chart of the XLF showing the big intraday reversal from lows.

Short Sterling sells off

Inflation in the UK was surprisingly stronger then expected. That ruffled the feathers a bit as we sold off in the short sterling contracts and gave sterling currency some much needed strength. Short sterling like Euribors have seen its calendar spreads go steadily upwards for the last week.
Euribor spreads saw new short term highs, Jun10-Sep10 hit 22s before coming off slightly, Dec10-Mar11 touched high of 19, and Mar11-Jun11 reached high of 21.5. I was shorting it all the way up, which worked to an extent cause there has been pullbacks before next leg higher. That will remain my strategy if we continue higher.
Bunds as expected dropped even further touching the 123 level. From here I would expect a further run down to the 121.5 level where we have had previous support. If that pans out we would have a perfect head and shoulders pattern. If we were to go the other way we could establish a range between 124.5 and 123.

Dow Jones rallies over 6%

As the bank plan got announced stocks rallied BIG time as investors are jumping on the ship snapping up financials. Big names like Citi and Bank of America where up 20% or more, in fact pretty much everything was up, great day to be long.
The bund headed lower as it couldn't cleanly breach 124.50 and now is trading 124.07. The shoulder has been set in place for the formation and we could see 123 as our next stop.
Euribors were extremely quiet today volume wise. Low interest from the start made trading difficult today with the lack of liquidity making it hard to get filled. I tended to short recent highs in the spreads which barely held, but wasn't able to get much size on. A day to mark of the cards really. We might see some follow through on bonds tomorrow after this massive stock rally. I personally hope we really do as the spreads are becoming very difficult to trade.
Personally long term, I feel that we might still test the lows again in stocks, maybe be not soon, but come the end of the year. All this trillions in spending has got to catch up with us at some point.

Euribor spreads continue higher

With the expiration of equity index futures there was some expected expiration volatility in the equity markets. Stocks headed down in the US after expected profit taking after such a big run up, with financial shares getting battered from highs reached yesterday.
Bund made early attempts to breach 124.50 area and breached the level in the afternoon as stock started coming off and buying pressure remained from the fed injection on Wednesday.
Euribors were bid the whole day with Ecb members comments regarding rates. As the expectations for a rate cut continues, spreads along the curve were going higher. We reached 21s in the jun10-sep10 spread after retracing to 20s in early morning, the sep10 dec10 spread reached 25s after trading at 23s in the morning. This trend is likely to continue in the medium term as things continue to look bad in the economy as a whole.
Long term I still favour the downside for the bund unless we breach 125s, then I think we could return to the 126 area.
Have a nice weekend

Bund trading

After the massive move up in the Bund yesterday, today's volatility didn't disappoint. As mentioned yesterday 124.50 proved to be a sticky point and of the open we came of 40 ticks before settling at the end of the day 123.79. The real story was the divergence between the Schatz and the Bund. Over previous session the bund has been particularly weak relative to the short end which is to be expected but today the schatz was pretty much unchanged where as the Bund was up over 150 ticks reversing the move up in Schatz/Bobl and Bobl/Bund spreads over the past few weeks.
Seeing this correction I tended to favour short position across the Euribor curve, which turned out to be the wrong play as white months were much more bid during the day. I spent the whole day averaging and managed to salvage the position as late on the spreads pulled back a bit.
Volume was good through out, with the euribors trading above 100k in front months, bund traded over 1 million contracts, just like the old days.
Looking forward, I still favour the bund to the downside despite the recent action by the fed, and in terms of euribor spreads, I would be looking to go long on any pullback as it looks increasingly likely the ECB will keep on cutting.