Tuesday, 1 April 2008

The April Fool?

Got up late today so decided to have a quick read of the blogs to get a bit of background info. Couple of items I picked up on were Banks with write downs (Mish's global eco trends), defaults on pooled mortgages (Mish again) and two items in the FT, one on Euro Libor and another on banks (via the Big Picture). Having got the impression yesterday that the stocks felt weak and the fixed income supported I was wondering if I was an April fool as I watched the action unfold this morning (see chart left).

As it was I never get too blinked with my views and can spin on a dime. I missed some of the down move, but did scalp a few ticks short from home before heading into the office. I will just note that the Bund was very lethargic in selling off with the stocks rally and again the volume was light. Yields are around that 3.94% level and seem to be attracting resistance here. In the larger view the Treasury/Bund spread moved a great deal last week and this may be another reason why the Bund feels supported. Yesterdays Doji in the US10Yr is warning of indecision and perhaps is foretelling of a minor trend change. Either the spread will narrow again, or the extra pressure will help the Bund test the 4% level.

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