I feel that the market will move the funds from risky assets to safe haven trades. With Syria, Tapering and Debt Ceiling in mind, my view is to go long the treasuries. I am going long far end and shorting the near end. See below a grab from Bloomberg. It showâs the hedge ratio. IF you long 10 EuroDollars then you need to sell 6 Two Year Notes or 5 Five yr Notes or 3 Ten Yr Notes and 2 30 yr Bonds Basically I view the curve as flattening going into the weekend. The best correlations for EuroDollar with 2 yr notes is Sep15 EuroDollar and with 5yr Notes is Dec16. Again my view to long the far End. For ED Sep 15 vs 2 yr notes, I will sell 5 ED Sep15 and buy 3 Two Year Notes For ED Dec16 vs 5yr notes, I will se;; 2 ED Dec 16 and Buy 1 5yr Notes. See the chart below. I am doing a FYT, Sell Five YR Notes to buy the 10 yr Notes, I am selling 3 5yr notes and buying 2 Ten yr Notes. I get the chart price by taking the (5 yr notes price X 1000 X 3 Lots) â (10 yr notes price X 1000 X 2 Lots) I would want to sell the spread @ 110500 with a stop @ 110650, You can use CMEâ ICT spreads tp trade the spreads. Itâs quoted in net change, at least you wonât get any leg outs.
Attached is the Bloomberg Curve Ratio for the US Curve. 90 Day EuroDolllar Interest Rates and 2 yr, 5yr, 10yr and 30yr Bonds
EuroStoxx 50 vs Stoxx 50 Future (SX5E vs SX5P) Vodafone heading higher in Europe yesterday. Search Google on Vodafone news. You will see a whole list of coming out. Now I am thinking to this in the stock index. EuroStoxx 50 does not have Vodafone in its components on the list but Stoxx 50 Future Vodafone listed. See Chart below. I want to buy the spread, because I think the Vodafone stock has been over done yesterday. My view to buy the EuroStoxx 50 and Sell Stoxx 50 Future. It just a simple spread Euro Stoxx 50 â Stoxx 50 Future. Euro Stoxx closed @ 2747 and Stoxx 50 Future closed 2688. Spread point is 59 pts. I want to buy the spread @ 50 pts with a stop loss @ 34pts. I just feel the pressure in Vodafone has been done and the trade will mean revert back. And I am doing a 1 by 1 spread.
S&P FTSE Spread over China PMI and HSBC PMI With the China PMI coming in way much better than expected over the weekend, I have a trade idea to buy the FTSE and sell S&P. I just feel with the US closed today because of Labor Day, The FTSE index will out perform the S&P. I am doing the spread a short term trade meaning I will be out before the Cash Open of the FTSE. I multiply the S&P by US50 and FTSE by GBP10 and the also multiply by the GBP S&P = 1641.75 X USD50 - FTSE = 6440 X 10 pounds X GBP See Chart Below. I think I can buy @ -18000 with a stop @ -18200. Just a view, I will have to wait for the HSBC PMI to come to confirm my buy, maybe with that confirmation, I will move my buy up to -17900 . Good Luck For More Trade Ideas, http://www.reystreet.com/category/trade-ideas/
Trading the 10yr Notes over Non- Farm Payroll Goldman Sachs expecting 200K and the poll is like 180K. I just feel that something is very wrong. Itâs like being setup for trade going which will go the wrong way. Funny that the US Indexes did not rise as much as I expected compared to the fall of the bonds. Funds will be thinking that they getting 3% on Bonds and also 3% yield on Stocks. Something has got to give. So my view today is that Non Farm Pay Rolls will be below 180K more like 150K. If you had a look at the bonds around the world. All the bond yield rose. Something like a concerted effort to make you feel good that the economy is recovering. I am buyer of the Treasuries today. Ten Yr notes is trading 122-135. I want to sell the 122.5/ 122 put spread @ 16, trading 14 bid at 16. Just feel with the Non- Farm Payroll it will trade higher. Well if it does not come out my way as I expected, I will take a loss on the trade. Hopefully to buy back the spread @ 20 pts. Ten Yr Levels 122-135,122-220,122-235 For More Trade Ideas http://www.reystreet.com/category/trade-ideas/