- Waited months for this to pull-back towards +11.5 to buy Bunds/sell UST. Abandon that idea now.
- Fed "move" yesterday has pushed this under the purple support line now. Changed my mind and will wait to see if downside momentum continues. If so, then opposite trade is in order ie sell Bunds/buy UST.
- With general expectations that earliest actual QE (if at all) by Fed will not be until next FOMC (02/03Nov), the threat of QE will not die and be supportive for UST. On the other side the ECB is seemingly on permanent hold. So, there is probably little reason for this chart to trade back up. Risk reward favors positioning for move towards negative.
2 comments:
My apologies. Bunds were closed when I called up this chart. Now that Europe is open for trading, the spread is at +18. [UST rally post FOMC while Europe had closed for the day].
Still, same conclusion. Re-think the original trade idea (buy Bunds) and consider going the other way (buy UST).
Hedge ratio :=
5 FGBLZ0 : 9 TYZ0
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