Click here if you are unable to view the charts in this report
| Fixed Income Daily Hotline 16 April 2012 By M Glowrey, Analyst |
 |
It is crunch time for Spain this week. Risk premiums for the 5yr Spanish CDS have extended their medium-term uptrend, and Friday's level saw the instrument push to new highs.
The yield on the 10yr benchmark is now touching 6%, a significant sideways level and a push above this barrier will send another signal of flight-of-capital.
This week will see Spain auction bills (tomorrow) and 2's and 10's later in the week. Given the current state of affairs, it is unlikely that the auctions will see strong demand, which in turn raises the possibility of ECB intervention.
In the Model Portfolio, we have a long position in this instrument. Given the binary nature of the trade over the next few days (yes/no for ECB intervention), we decide to take a profit. We would re-purchase on a confirmed uptrend reassertion.
As a counterpoint to the price action seen in Spanish bonds, inflows into the Bund have printed some strong upward dynamics in the German benchmark. In previous Hotlines, we had put forward the theory that the instrument may have some difficulty in maintaining the breakout, but for the moment, momentum appears to be holding up well.
Short-side trades should be avoided until there is some evidence of a turnaround in momentum.
Likewise the gilts, which are firm. However, here we watch for resistance as the 10yr approaches the important 2% YTM level. The 5-year chart shows the context.
And finally, the JGB is at a very important technical level. as the YTM chart shows. We watch to trade the breakout, or the failure. At the moment, strong price action in the June future suggests that lower yields will be seen in the short-medium term.
P&F Breakouts: Apr 13, 2012.
None Found
P&F breakouts identify medium-term trend changes. "Bull" breakouts occur when a stock reverses its downtrend by posting a "higher high". "Bear" breakouts are the inverse.
Key Day Reversals : April 16, 2012None found
Key day reversals are technical signals formed by stocks posting an "outside day" of a higher high and a lower close. Sells/Peaks occur on countertrend reversals from a bullish trend and buys/Troughs occur on countertrend reversals from bearish trends. Signals are particularly powerful when occurring after a period of overextension.
MA Crossovers : April 16, 2012
None found
Moving Average (MA) crossovers identify longer-term changes of trend. We scan for "Golden" (bullish) and "Dead" (bearish) signals occurring when an instrument’s 50-day MA crosses its 200-day MA.
| Date | Stock | Code | Type | Open Price | Current Price | % P&L | Stop | Comment |
| 26 Mar 2012 | Spain CDS USD SR 5Y | SPAIN | Long | 432 | 503.625 | +16.58% | 340 |
| Date | Stock | Code | Type | Open Price | Current Price | % P&L | Stop | Comment |
| 28 Mar 2012 | 10-year JGB (Jun 12) | JBM2 | Short | 141.95 | 142.69 | -0.52% |
- We take a profit in the Spain CDS
- We "hang in there" on our short psoition in the JGB, although given the recent price action, our conviction is waning!
| Symbol | Name | Comment | Close | 1 day | Support | Resistance |
| TUM2 | US 2yr T-Notes (Jun 12) | Probes the sideways resistance. | 110.219 | +0.0% | 109.90 | 110.2 |
| FVM2 | US 5yr T-Notes (Jun 12) | Sharp move up to the previous resistance. | 123.477 | +0.1% | 121.42 | 124/122.8 |
| TYM2 | US 10yr T-Notes (Jun 12) | Probes the February resistance. | 131.531 | +0.3% | 127.70 | 132/130 |
| USM2 | US 30yr T-Bond (Jun 12) | Extends the rally back into the Jan/Feb range. | 141.438 | +0.7% | 134/135.20 | 144.4/139.20 |
| USSS10 | USD 10yr Swap Spread | Losing downtrend momentum - base? | 11.5 | +9.5% | 3.3 | 15/10 |
| CNM2 | Canadian 10-year Future (Jun 12) | Rallies back up to the highs. | 132.45 | +0.3% | 129.44 | 131 |
| DUM2 | Euro 2yr Schatz (Jun 12) | Consolidates above the breakout. | 110.515 | +0.0% | 110.10 | 110.40 |
| OEM2 | Euro 5yr Bobl (Jun 12) | Consolidates above the breakout. | 124.95 | +0.2% | 122.8 | 124.2 |
| RXM2 | Euro 10yr Bund (Jun 12) | Powerful upside breakout. | 140.36 | +0.5% | 135.5 | 139 |
| UBM2 | Euro 30-year Buxl (Jun 12) | Powerful upside breakout. | 128.6 | +0.8% | 120.8 | 129 |
| JBM2 | 10-year JGB (Jun 12) | Pushes above the prior resistance. | 142.69 | +0.1% | 141 | 142.5 |
| YMM2 | Australian 3-year Govt Future (Jun 12) | Moves to uptrend. | 96.83 | +0.1% | 96.1 | 96.6 |
| XMM2 | Australian 10-year Govt Futures (Jun 12) | Moves to uptrend. | 96.255 | +0.0% | 95.8 | 96 |
| L M2 | Short Sterling (Jun 12) | Fails to hold early March upside breakout. | 99.02 | +0.0% | 98.97 | 99.2 |
| ERM2 | Euribor 3m (Jun 12) | Holds LT uptrend. | 99.32 | +0.0% | 99.27 | 99.36 |
| EDM2 | Eurodollar (Jun 12) | Has moved to range-trading. | 99.52 | 0.00% | 99.47 | 99.60 |
| G M2 | Long Gilt Future Jun 12 | Pushes above the range highs. | 116.16 | -0.4% | 113 | 115.8 |
This report has been produced and compiled by Investors Intelligence, a division of Stockcube Research Limited which is authorised and regulated by the Financial Services Authority, according to the requirements of the Financial Services and Markets Act 2000. It is distributed by Stockcube and is provided for information purposes only. Under no circumstances is it to be used or considered as an offer to sell, or a solicitation of any offer to buy. While all reasonable care has been taken to ensure that the information contained herein is not untrue or misleading at the time of publication, we make no representation as to its accuracy or completeness and it should not be relied upon as such. From time to time Stockcube and any of its officers or employees may, to the extent permitted by law, have a position or otherwise be interested in any transactions, in any investments (including derivatives) directly or indirectly the subject of this report. Also Stockcube may from time to time perform other services (including acting as adviser or manager) for any company mentioned in this report. The value of securities can go down as well as up, and you may not get back the full amount you originally invested. Derivatives in particular are high risk, high reward investment instruments and an investor may lose some or all of his/her original investment. If you make an investment in securities that are denominated in a currency other than that of GB Pounds you are warned that changes in rates of foreign exchange may have an adverse effect on the value, price or income of the investment. The investments referred to herein may not be suitable investments for all persons accessing these pages. You should carefully consider whether all or any of these are suitable investments for you and if in any doubt consult an independent adviser. This report is prepared solely for the information of clients of Stockcube who are expected to make their own investment decisions without reliance on this report. Neither Stockcube nor any officer of Stockcube accepts any liability whatsoever for any direct and consequential loss arising from use of this report or its contents. This report may not be reproduced, distributed or published by any recipient for any purpose without the prior express consent of Stockcube.
Copyright 2012 by Stockcube Research Ltd.
back