European Yield Curve continues to flatten

As worries about Cyprus continues and the possible knock on effect on the rest of Europe we have seen the type of trade which was common in 2007/2008 where we had a flattening Yield Curve, and at the current pace it could even become inverted!
Currently we have the Bunds up 64 ticks for the day and Mar14 Euribor down 1/2 tick and on its lows.
Spreads have continued to come off and are on lows that I haven't seen yet for this cycle. I continue to buy into this, but very cautiously as it doesn't look like letting up at the moment.
What the main risk is whether the credit grade of Euribor will worsen, and if so we will see the front months get hit quite a lot as Inter bank lending can dry up on the sign of loss of confidence within Banks.
With a four day weekend coming up in Europe, I suspect something big will be announced over the weekend.
We shall see!

Another week, another bout of leaked data

Today we had a lot of data out, and they're were all out of line from expectations, which led to some nice moves in the market. But wouldn't it be nice if you knew the number before hand. Well some people do, and its becoming a bit of a joke. We had UK retail sales numbers at 9 30 UK time, with cable being pushed up 20 ticks or so coming into the data, you could see buy orders pushing it up just as the data was due.

And in a more blatant leak, Nat gas again was spiked down 40 ticks just before the number came out, and then low and behold a build in nat gas and we had a bigger spike.

In other stories, Cyprus continues to dominate the headlines, as the uncertainty over what will be there course of action is unsettling the market.
Also poor PMI numbers out of Germany and France pushed the Euro lower.
Euribor yield curve continues to flatten into the afternoon, as Mar14Jun14 is trading at 3.5s, and Jun14Sep14 is approaching 4.5s. These levels held up very well earlier in the week, so if they get there again, mite be worth a load up!

Cyprus Issue pushing down Spreads.

While equities continue to go higher on the back of possible action out of Cyprus, Euribor and Short Sterling Spreads and the Yield Curve in General has been under alot of pressure, as we approach multi month lows in these spreads.
As I always do I have been buying these Spreads as they approach these levels, but with a bit more caution as its hard to tell how long this will continue. Yesterday presented some good volatility as we pushed up in Bonds, before retracing a large part of it. Mar14Jun14, Traded from 5s to 5.5s, yesterday but today has traded down to 4s as the move continues downwards. Im long some 4s and 4.5s looking to get out at 4.5s if it comes. This story is replicated along the curve, in the red/greens, Mar15Jun15 traded 6.5s rebounded to 7.5s, and now trade back to 6.5s and traded as low as 6s earlier this morning.
Todays action has not been as volatile as yesterday, but there has been so big clips going through, on this yield curve flattening.
Going forward the main event of the week is tomorrows FED announcement  This will give further guidance on how accomodative the fed will be, hoping for some fireworks!

Trading Update

Been a couple of weeks since my last update. Mainly because there hasn't been anything out the ordinary trading wise. Its pretty much been lower volume and volatility as far as fixed income is concerned with spreads drifting lower.
We had the ECB and Non farm last week, with Draghi being less dovish then was expected, which gave a boost to the euro. Non farm came out much stronger as well, with well over 200k jobs created in the US in the previous month with unemployment rate ticking down to 7.7% This has helped to underpin the rapid rise in the stock markets as we are hitting record high after record high in this DOW.

Personally i think we are due a big correction, but it seems that any sign of weakness is the sign for stocks to be snapped up for those waiting for pullbacks.
As far as spread trading is concerned, I have been long pretty much for the past week, trying to nick half a tick here and there. Ive been trading mainly around Jun14 to Jun15. Especially Mar15Jun15 spread which traded as low as 7s, and is now back up to 8s. Im now looking to short this at 8.5s if it gets up there. I'm also looking to short 7.5s in Dec14Mar15.
Hopefully we will get some better volatility out of these markets in the coming week considering its quarter end, and roll over for all contracts pretty much.
Looking ahead this week, the main data we have is US retail sales on Wednesday, and CPI figures on Friday as well as triple witching on Friday with expiries in March Stock Index Futures and Options, which could lead to some wild movements.

Euribor Sores Higher on LTRO

The Euribor spiked after the European Central Bank said that European banks were set to pay back a far lower amount of the cheap funding they received during the eurozone crisis than had been expected.
The volatility at the time was insane as my platform froze, as the volume of orders going through was massive. Over 100k contracts traded on the euribor in that 1 minute following the news, which explains why my system froze.
Either way, I couldnt get long as my orders were all going stale, but once we pushed up, I managed to get long the whole curve and then make profit on those spreads which worked out well.
But judging by the size of the clips going through, there are going to be a few guys popping some bubbly tonight!
Below is a video of the move with some analysis. Volume is a bit low.

BoE Vote 6-3 for more QE - Gilts Spike

There was an unexpected outcome from the BoE minutes as the vote for more QE was 3 - 6 against, this is up from the 1-8 decision that has been the norm of late.

From the economist:

The Bank of England's Monetary Policy Committee was split 6-3 on more bond purchases earlier this month, unexpectedly reviving the prospect that the central bank might restart its quantitative easing programme.


Bank of England governor Mervyn King, executive director for markets Paul Fisher and external MPC member David Miles all voted for an increase in the central bank's bond purchases to 400 billion pounds from 375 billion pounds.

The last time there was a similar 6-3 split on the MPC was in June 2012, and the following month a majority of the MPC backed a 50 billion pound increase in asset purchases.

In recent months, only Miles had supported more bond purchases.

We had a big move in the GILT and GBP/USD, although we faded the whole of the move in the GILT.

As we can see cable dropped from 1.5430 to sub 153! where as the GILT spiked 120 ticks in 3 minutes before fading the whole move. This was despite good employment figures which was released at teh same time.

Of the back of this I tried shorting all the spreads in the Short Sterling strip as there were at the top of the ranges, but as we faded the selling in the spreads didn't materialize as well so ended up with mainly scratches  But this was a welcome bout of volatility in Short Sterling as its been like watching paint dry recently!

Trading Update

Been a bit difficult this week, Volume has wained slightly, meaning its harder to get in and out of Spreads quickly, and they require holding for much longer periods. Also with the fall in the Bund, Euribor and Short Sterling Spreads have been pushing upwards, but its that slow grind upwards without the retrace, which can leave you bleeding money slowly, but without really knowing it!
With Mar14Jun14 spread coming down to trade 6s, when we bounced up to 7s I started to short small, it then went to 7.5s so I shorted more, and then it was looking like it was going to push 8s as well. This type of movement was replicated along the curve, and I ended up being short the whole curve from Mar14 to Sep15! Wasn't looking pretty but after some dovish comments from ECB officials mid morning provided the snap back I was looking for and luckily I managed to get out all my positions, for some profit at the end of it.

I don't see much change in the style of action we been getting going forward, but you can see there's many more players in the market which is great!