Jun10/Dec10 spreads for 3 month Eurodollars, Euribors, Short Sterling and Aussie Bank Bills.- All topped/topping out.
- Aussie rate hike pushed spread lower = not expected to be endless series because inflation non-issue (this we surmise from price action, not own view).
- Expect same kind of reaction if there is a surprise rate hike elsewhere (near zero chance).
- Positive carry on short spreads.
- So - rate hike = narrowing. No rate hike = narrowing.
- Like the ED chart best because of additional feature of macro double top in addition to micro SHS top.
08 October 2009
Short Term Interest Rate Spreads : Narrowing
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1 comment:
Feedback+View from Aussie friend :=
"general feeling in australia is that rates will rise on a steady plane by 25 bp with an odd interval to check the effect
CPI is released here on 28 th oct
It was interestinv the RBA hiked befoe employment and cpi ie do they know something ?
also the expectations of cpi here and wot is prioced into cpi bonds is circa 1 pct
this is much higher than the 0 pct and 0.3 pct they expected 6 months ago.
My belief is that the market is still tentative in pricing in hikes .. it may look like there s a lot priced in bu there are gaps and as of now there is no mention of a 50 bp . but i believe in 2010 we will see a couple of 50s to get us into 4 1/2 / 5 pct range in cah rate
from thatpoint of view i think mar - sep/ dec is vulnerable to a blow out as that is when the market will gain its legs and the rba ups the ante"
Always good to listen to other side of the story. Thanks PH.
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