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Wednesday, 20 February 2013

Wed 20th

NAV 120.2

Gilts
Some nice fills of 2 GTC orders in gilts to start the day :

sell 5 at 115.95
sell5 at 116.45 (!!)       now short 40.

The market spiked up on the headlines about King voting for more QE, only to end the day down 0.22. Now short 40 G H3, and working a single bid for 5 at 114.25 (GTC).

GBPJPY
Although I think they're wrong, the market is taking a stick to GBP. I suspect the GDP data is rubbish and the employment data is telling the real story, but I'm not fighting it yet, so cut the gbpjpy position (again)

sell 0.5m gbpjpy at 143.062. Now flat

Tha's the second buy high/sell low that I've now done in gbpjpy, which tells me I should stop trading this cross for the moment.

Gold
Having said previously that I now had 100% of the position I wanted in gold, I think that exiting the gbpjpy trade makes room for a little more. A rather sloppy piece of execution after the Fed minutes, selling down $45 on the day. I should have been patient and waited for a better level tomorrow as everyone calms down.

sell 2 gcj3 at 1559.5. Now short 15.

T-bond futures
Same as the gold trade. Appalling execution, selling down on the day after the FOMC minutes. A true D-.

Sell 2 USH3 at 142-27. Now short 15.

I think both of these trades (gold and t-bonds) will be fine in the end, but the contrast with the execution in gilts where I sold the high tick of the day is pretty stark. Sure enough, both these trades ended the day in the red, whereas my average sale in gilts today closed almost a point in the black.


BIG PICTURE

The Fed is starting to think about the exit, and their discussions will be on this topic. This is toxic for the assets which have gained from QE, so we should be trading bear markets in yen (already largely complete, with a 20%+ collapse since November), gold, followed by long dated treasuries and finally eurodollars. Perhaps we trade a range in equities too (after all, the reason the Fed can even think about exit is because the economy is in reasonable shape, which is not the stuff of equity bear markets. Besides, I don't think the positioning in stocks supports a real bear market here, unlike gold, treasuries and EDs).

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