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Fixed Income Daily Hotline 
16 April 2012              By M Glowrey, Analyst
Chart of the day: Spanish CDS test the highs......

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.

Daily Comment:

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, 2012
None 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 instrumentís 50-day MA crosses its 200-day MA.

The Fixed Income Model Portfolio
Fixed Income Model Portfolio Longs
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
Fixed Income Model Portfolio Shorts
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!
Daily Analysis

Symbol Name Comment Close 1 day Support Resistance
TUM2US 2yr T-Notes (Jun 12)Probes the sideways resistance.110.219+0.0% 109.90110.2
FVM2US 5yr T-Notes (Jun 12)Sharp move up to the previous resistance.123.477+0.1% 121.42124/122.8
TYM2US 10yr T-Notes (Jun 12)Probes the February resistance.131.531+0.3% 127.70132/130
USM2US 30yr T-Bond (Jun 12)Extends the rally back into the Jan/Feb range.141.438+0.7% 134/135.20144.4/139.20
USSS10USD 10yr Swap SpreadLosing downtrend momentum - base?11.5+9.5% 3.315/10
CNM2Canadian 10-year Future (Jun 12)Rallies back up to the highs.132.45+0.3% 129.44131
DUM2Euro 2yr Schatz (Jun 12)Consolidates above the breakout.110.515+0.0% 110.10110.40
OEM2Euro 5yr Bobl (Jun 12)Consolidates above the breakout.124.95+0.2% 122.8124.2
RXM2Euro 10yr Bund (Jun 12)Powerful upside breakout.140.36+0.5% 135.5139
UBM2Euro 30-year Buxl (Jun 12)Powerful upside breakout.128.6+0.8% 120.8129
JBM210-year JGB (Jun 12)Pushes above the prior resistance.142.69+0.1% 141142.5
YMM2Australian 3-year Govt Future (Jun 12)Moves to uptrend.96.83+0.1% 96.196.6
XMM2Australian 10-year Govt Futures (Jun 12)Moves to uptrend.96.255+0.0% 95.896
L M2Short Sterling (Jun 12)Fails to hold early March upside breakout.99.02+0.0% 98.9799.2
ERM2Euribor 3m (Jun 12)Holds LT uptrend.99.32+0.0% 99.2799.36
EDM2Eurodollar (Jun 12)Has moved to range-trading.99.520.00% 99.4799.60
G M2Long Gilt Future Jun 12Pushes above the range highs.116.16-0.4% 113115.8

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