- Core book is short EUR vs "everything" (namely CAD, Gold, USD). Concentration risk is high, but trends are strong so I do not wish to reduce current positions.
- But even strong trending markets will see retracements when positions are stretched, and these often get triggered on the flimsiest of excuses when the timing is ripe. Need to protect myself against backlash from these almost sure-to-happen setbacks.
- Of the view here that Bunds are "tainted" by Greece bailout in the longer term.
- Near term, bunds are supported by spread activity, weak growth and absence of inflation, and carry trades driven by accepted low likelihood of ECB tightening.
- Chart-wise : EU10YY at 3.05% now. Historical low at 2.856%. Planning to go short Bunds against the 2.856% stop loss, if (and only if) market gives me a good entry point. Will be very very patient about this. [This is Take 2. Take 1 was stopped out on GS/SEC].
- In event of a snap-back rally in EUR/USD following a relaxation of Greece contagion fears (however temporary), the short bunds position should help set-off partially the negative FX P&L.
- Intention : EUR FX = Core. Bunds = "Trading" Hedge. Usual rule about not getting involved in non-trending markets/charts does not apply here.
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