there is an election due and the Republicans are headed for a Custer style blood letting..... with leftist governments being installed elsewhere, the long side ain't liking the landscape....
mcurto, may you please comment this piece written my broker to me 3 years ago? >>The spread may go from +20 tics to +10 tics over the course of the rollover period. The BRAT team is a euphemism for all the spread scalpers. They typically make alot of money during the roll as they acquire huge short spread positions early in the roll and then slowly begin the unwind them over the course of 5 or 6 business days. You may want to short the spread at the next rollover. It is a high probability trade. But be aware, there is always the possibility that the spread may widen , based on specific market fundamentals. >> Can you please explain me what these guys do?
The BRAT team is the Bond Rollover Action Team. Basically CBOT locals that only trade during the rollover and generally accumulate short positions ahead of the long position rollover. This works when the market has on flatteners, as they will be net sellers of the long end spreads, buyers of the short end spreads. This time it is the opposite, most funds have steepeners on. Furthermore, we have had a general spread widening; swap spreads, emerging market spreads, everything vs. US Treasuries has widened a little bit, thus the roll spreads will follow and have caught a bid this time around.
mcurto, I'm sure many have said this before, but I'd like to say it anyway. Thank you for posting here. You are among a small handful of posters that I will read without fail.
Uncertainty does not bode well for the long end, continued widening of swap spreads today vs. UST's. At widest levels since late 2005. But the 2-10's cash spread did break past that +10 bps level, next target from one of the dealers is +4 bps or so.