More Fun With Interest Rates

While we’re on the topic, let’s review the spread we have on from 6/9, (S) US 10 yr, 2.99% / (L) Ger 10 yr, 3.03%, thus -4. That is, we expected US rates to head higher vs Ger. We also have an outright view but the qlt flt triggered by Greece illustrates that spreads can sometimes be a more conservative approach. Last on that spread +13 with the US leg at 3.10% and the Ger leg at 2.97%, thus US prices much lower, Ger prices higher from 6/9, a satisfactory result.

Two key factors inspired the trade: 1) our view for a US recovery and end to Fed meddling and 2) the reality that the ECB would soon brake given Germany’s real sector vigor.
　

Robert Craven