- Bernanke's "case for further action" pretty much nails QE2 as a done deal. Strange that yields are higher post-speech given Fed's unlimited capacity to buy TY. Don't fight the Fed! (not so for BOJ). And its way too early for buying rumor selling fact.
- Have taken the opportunity to go outright long TY. However, rather than keep building up book size by buying yet more TY, I have chosen to unleg the short Bunds leg of my TY/Bunds spread. I don't see US10YY going too much above 2.60% and staying high (now 2.52%). Still target 2.20%.
- Bought Dec10 Bunds at 130.77 (apx 2.355%) for a start = daily downtrend line resistance on EU10YY chart. Will buy more if we were to pull back further to the weekly DTL yield resistance at 2.49%.
- So spread is reduced, and a naked outright long TY now appears in Risk Table.
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Paid 130.33 to square off more Dec10 Bunds.
Now naked long TY and spread +TY/-Bunds in equal risk measure.
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