04 March 2011

STIR Spreads : ED too narrow

  • A look at Jun11/Dec11 3-month interest rates futures calendar spreads.
  • USD : Reckon too narrow at current +29. Long EDM1/Z1 here originally as a hedge against possibility of higher rates (for whatever reason) playing havoc with my core long commodities and short USD/fx positions. Trade might well come alive soon, in light of ECB moves and very soft USD. A strong NFP tomorrow will nail this. Good reason to take this off "hedge" status and look at this as a trade worthy on its own merits.
  • EUR :  Breaking out +51. Around +50 seems a fair level to me but if break holds, +62 should be easily seen, maybe even +75 if any "accidents".
  • GBP : Currently at +58. This has been as wide as +70.
  • AUD : Included here to illustrate narrowing towards the end of tightening cycles.
  • Conclusion : USD stands out at +29. Am mega long at +29.5 already so sitting tight. Will increase position if weekly chart closes above next chart high at +41. If we get more good growth numbers, this should be at +50. [Been as wide at +72 although way back when these were back month contracts].

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