Bunds back up as Spreads retreat

So after the euphoria of the comments from ECB officials which sent spreads higher, we have now got a full retrace from that move as we are trading 4.5/5s in sep13dec13 after trading as high as 7.5, this is the case along the curve as we have flattened by 20 ticks + from earlier levels between sep13 and dec14. The fade was always the trade, but it was all about timing and with such a big move up at the time it was hard to know where it was going to stop.
Looking at things as they are, I'm favouring long here in the Euribor spreads as we are in this big range, and here I think we have good value. Secondly we have pushed up 300 ticks in the Bund since last week trading now at 143.90 after being as high as 144.37, but at the same time we have had a rally in the Euro as well as other currencies as we have had alot of dollar weakness.
Now with the Bunds heading towards highs (currently at 143.90) and dollar retreating, something has to give, and a long dollar short Bund trade could be a good hedge, as we enter September and the big players may be returning and see this disconnect.
143.60 was the level we spoke about in the last analysis on the break of 142.20, this has now turned to support after the break above it.  The Bund has pushed higher since then so a break of this support could see us trade back down below 143, with the next targets as 142.55 and 142.20.
Alot of the movement will hinge on what Draghi will be saying at the ECB press conference next week as the market is eagerly anticipation some type of decisive action, so there could be a lot of positioning before then as speculation will continue till the meeting.
So hopefully September will provide more volatility and volume then we have had recently!

Bond Market Analysis: August

A quick look at the moves over the past few weeks, as the unwinding of some cramped trades has lead to Bunds falling over 500 prices from its high and a big steepening in the Bond Yield curve as one would expect with such a down move.

Big Drop In Bunds as Euribor Spreads soar higher

In what was one of the most crowded trades in the market, the drop in the Bund lead to a domino effect as we came off over 250 points in over a day as we traded below 141 this morning, before seeing some retrace currently trading at 141.70.
This big move in the Bund was accompanied by a big stock move, or a big move in the Euro which suggests its Bond specific, as traders may be betting on a big announcement from European officials when they get back from there summer break.
This move down in the Bund, prompted a big drop in Euribors also and hence some major steepening along the curve. Spreads moved more then I have seen in a long time, with barely any retrace making it a very difficult and tough day to trade, especially for mean reversion traders like myself. What made it harder was that there was no real apparent news for this big move, so no real warning either.
Mar14Jun14 was trading 7.5/8s before trading as high as 10s this morning. This action has been the same along the curve, with bigger moves on wider maturity spreads.
I've been selling these all the way up, and I'm holding put as personally I think this is overdone, but Im slowly taking bits of the table to lower risk, but this by far has been the most trend day so far of the year I can remember. But I guess its better then flat lining.
Although the move up yesterday was on low volume as expected in August, so hoping for some type of retracement.
Not much else out for the week, so will be taking it easy, watching where these Euribor Spreads settle.

Introduction to Calendar Spreads

An introduction into the basics of Calendar Spreads, and with some real time example with the Eurodollar Future.

All eyes on FED and ECB

The monster rally we have had in equities and the Euro on the back of comments out of the ECB that they will do whatever is necessary has put the market in a position where any disappointment will smack everything back down again.
Hopes that some type of European solution will come out of the ECB meeting on Thursday is spurring the markets with talks of a further rate cut, another LTRO program, or even Quantitative easing.
As far as the Spreads go we have pushed up along the curve, with Sep13Dec13 trading at 6s after being at 5s, Mr14jun14 trading as high as 7.5s after trading 5.5s/ 6s a week back. We are starting to fade these moves slightly, but in reality I dont see any other outcome then a full fade eventually as I dont think there can be a sustainable solution to this problem, despite these short term solutions. I have been trying to go short on any move up, and so far this has been working, but I will be wary of this after the ECB meeting if comments are positive for the Euro zone.
With the ECB on Thursday, the FED on Wednesday and US Non Farm Payrolls on Friday, we are set for a bumper week and potentially alot of volatility.
Fingers crosed!

Stocks sell off as Spanish Yields top 7.5%

Its been a pretty gruesome session to say the least. The Dax along with the all the other European indicies are being sold off aggressively as fears grow that Spain would need a full sovereign bailout.
Dax is down almost 4% as I write and as you would expect Bunds near all time highs again, trading currently at 145.87.
The Euro has been hit hard with it trading below 1.21 against the Dollar, and at this rate we looking to test the lows set June 2010 at around 1.18. The difference is this time we have much bigger economies struggling where as that time we were dealing with Greece, Portugal and Ireland.

As far as trading action goes in the STIR spreads, surprisingly we haven't come off as much as you mite expect. Jun13Sep13 Euribor has been trading between 2 - 2.5 the whole day with low volume again, and its a similar story all along the curve. The lack of volume is still making it difficult to trade, but if we get interbank lending tightening up as we did in 08/09 we could start to sell of at the front end of the curve bringing some volatility and volume.
As the markets are pushing Spain's hand more and more, its only a matter of time before a bailout is requested, and the question is who is next! Worrying times...

Introduction to Spread Trading

A small video into some basic concepts of Spread trading