As expected, weak NFPR

Well as we guessed the Non-Farm did indeed come in lower with the headline figure dropping 80k. This caused a rally across the curve in fixed income. I did however find the action on Friday a bit confusing for two reasons. Both the US and European bond markets retraced pretty much all their gains post payrolls and on some very good size. The Bund getting within 5 ticks of its pre-non farm rally. What was particularly odd was that it was very difficult to identify when this presumably NFPR profit taking was going to finish. When it did the turn around, it wasn't all that clear to me and the resulting rally took out the previous high, largely due to the rally in the UST's. Again the cue seemed to be purely off the back of the stock market. However, I do note that for a non farm friday the Bund volume was light at some 800k ish lots. Which leads me to my second source of confusion and that is how the equities seem to have disregarded non-farm. However I would have to say that I don't think the daily Dow chart looks at all constructive. Three spinning tops with what looks like a good swing higher forming on the daily bond charts makes me think that stocks are going to be under pressure early this week.
On the calendar to look forward to we have very little in the way of decent data. 11:00 tomorrow provides Feb industrial production for Germany, and given the strong ifo, I wouldn't be surprised if this came in better than expected. This week is really going to come down to Thursdays ECB press conference to see if the uptick in inflation and the public sector pay deals have the ECB hawks on full alert and willing to up their rhetoric. The beginning of the week will be about the stocks and risk aversion keeping the bid into the fixed income markets.
On Friday at 16:00 the yields were Euro(2,5,10) 3.48, 3.66, 3.94 and US (2,5,10) 1.85, 2.64, 3.49. The euro stood at 1.5738 and at 0.7893 against Stg. The curves continuing their flattening bias, as the US / Euro curve widened reflecting the poor figure on Friday.

Lacking direction

Yields across the curve fell slightly from yesterday in what was a lackluster days trading. The surprise was the Eurozone Retail Sales figure for February that was expected to show a 0.2% rise. However this came in at -0.5% mom, this lead to a bit of a rally in price. What was more of a worry in the figures was that Germany, the most important of the Eurozone countries, registered a fall in retail sales of -1.6%. I think this is quite significant and shows that perhaps the economy is not as robust as we are lead to believe.
We had the Service NAPM out of the states in the afternoon and this showed a small uptick but didn't lead to much action in the fixed income. Once that was out the way the market tread water, with all minds fixed on tomorrows NFPR. The German factory orders may provide some short lived interest tomorrow around 11 gmt but after that we will have to wait for the 1:30 lottery that is Non-Farm. We had another Doji today in the Bund and shows that there is much indecision in the markets down near this 4% yield. Only a higher than expected figure will lead to its breach. Given the very high Jobless figure today (Easter calculation issues apparently!) we would have to be thinking that NFPR will be on the weak side.
At 16:00 the yields were Euro (2,5,10) 3.50, 3.68, 3.98 and the US 1.87, 2.70, 3.56.
Euro was 1.5613 and 0.7834 against Stg.

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.

Good bye March...

What a dull day in the Bund today, when I left the office it had only done 772k lots by 16:00gmt, which is very low for that time of day. I found the price action not to my liking for most of the day and was very surprised to see that the strong Chicago pmi soon got shrugged off. Even the employment, new orders and the prices paid were all higher. Today was very much a stocks watch day with every down tick in the Dow being met with support in the Bund. Tomorrow I will be focusing on the UK manufacturing pmi at 9:30 then it will probably be time to catch up on all the blogs and weekly research until 15:00gmt. All eyes will firmly be on the ISM manufacturing figure to see if it follows the Chicago's uptick.
I get the impression that the Bund is finding support down at these price (115.85) levels and 3.94% ish seemed to hold in long before the euro started probing new highs against the dollar and sterling. Its unusual to see such a big gap on the Bund chart and I think we will probably take a look and visit it soon unless the ECB's rhetoric becomes more hawkish.
At 16:00 the yields were euro (2,5,10) 3.42%, 3.59%, 3.89%
US (2,5,10) 1.62%, 2.45%, 3.41%
Euro was 1.5847 and to stg 0.7972.

The low 5 year yield i quoted yesterday was for the German 5 year and not the eurozone 5 year. I have no idea why the two are so wide and cant help but feel these are erroneous quotes as Reuters still have German 5 years at 2.74% (DE5YT=RR) answers on a postcard please

The needle of the compass

The ECB only has one needle in its compass. ' The primary objective of the ECB’s monetary policy is to maintain price stability. The ECB aims at inflation rates of below, but close to, 2% over the medium term. '

Well the flash estimate for CPI just came out at 3.5%, the euro had firmed up some more against the majors. Spanish CPI came out this morning at 4.6% yoy. Fixed income didn't really bat an eye lid. Bund volume is light at 225k lots. It would appear that the needle of the compass is not doing its job. Perhaps the medium term history will prove to judge otherwise.

Fat Finger Friday

Before I go on to preview next weeks market I though I would make an entry about Fridays price action in the Bund. The market had been relatively quiet for most of the morning, the range was an average 30 ticks on volume of about 265k lots by 11:00 gmt. This is relatively light for the bund, but with a lack of any decent economic news, to be expected. Then at 11:17 gmt the Bund fell out of bed in the biggest way I have ever seen. It dropped 172 ticks in 4 seconds!!!. I have never seen the Bund do this and no other instrument really responded because it all happened so quickly. This was a bigger move than those of the Sept 11th attacks. The exchange closed the contract for 2 minutes and when it re-opened it was only 20 ticks lower than where it had been before the strange move. Given that the Bund is one of the most liquid futures contracts this has all the hall marks of a fat finger or error trade to me. The total volume transacted during that minute was 44k lots, but some of that would have been other electronic stops all tripping over each other. All in all a quite extraordinary move.

My First Entry

I have decided to dabble into the world of blogging and have decided to do one focused on my interest in trading futures. I don't know if I will have enough time or material to write this everyday. However I want it to provide me with a tool to order my thoughts about my trading, and the markets. I hope it will also prove useful and informative for others.

I was inspired to do this because I read many really good blogs that cover trading and the economy. Although I haven't come across many that focus on the fixed income markets. I am not offering any advice or recommendations about trading. Its more about making observations and sharing them with others.

I mainly trade the Bund Future that is listed on the Eurex Exchange. I do this with my own capital and have been doing so for a few years. The tools I use for this are Trading Technologies X-Trader, E-signal and Market Delta.

As this is my first post I am going to publish this and see how it all looks before I start rambling on about the Bund. Also as I have never written a blog or indeed anything much since my school days my style may not be up to the high standards I have seen from others, but this should evolve and improve with time.