Goodbye UK Curve
We have been long the UK curve since King’s surprise, Oct/6 (10 yr - 2.31% / 2 - 10, 171 / 2 - 30, +266, 5 - 10, +102.). We told clients just after that announcement to either sell UK debt outright, or own the curve (L - S). The trade performed satisfactorily, and half the gains were taken in 10/14 (2 - 10, +200 / 10yr - 2.61%).
We told clients to take the remainder of the position into the EU decision. Last, 10yr, 2.62 / 2 - 10, + 202 / 2 - 30, +291 / 5 - 10, +119.
We recommend exiting this trade. We’re not especially happy with the CBI read of Oct/26, something we did not anticipate. Plus we simply don’t like the feel, past few days.
It’s been a fun experience. Let’s put it to rest and go on.
Robert Craven
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