We may simply repeat instructions from recent sketches – traders are to look for opportunity to own (L-S) the UK term structure, most certainly not to sell it; the course-of-least resistance will remain wider, Q1. That advice was highlighted Jan/10 (2-30 @ 288 / 5-10 @ 109) and again Jan/28. Last, 301, 117.
It is true we mostly confine illustrative strategy to the term structure but then this simple little spread embraces more of the dynamics - the existence or lack of tension in the FI market - than any other; and, with this outcome in hand, the experienced trader can do well.
Key is that the central bank will remain generous in the face of price pressures, in the act of providing cover for government policy, and the desire for a weaker pound.
Finally, although the UK economy is not in the best of shape, most observers continue to over-estimate weakness for H1.
Carney’s testimony today disappointed some as he appeared to be a tad stingy. If Carney would have come right out and targeted nominal GDP our spread would have come in for a bit, and then exploded. Carney will error to the side of generosity anyway; July is not that far off.
Robert Craven
It is true we mostly confine illustrative strategy to the term structure but then this simple little spread embraces more of the dynamics - the existence or lack of tension in the FI market - than any other; and, with this outcome in hand, the experienced trader can do well.
Key is that the central bank will remain generous in the face of price pressures, in the act of providing cover for government policy, and the desire for a weaker pound.
Finally, although the UK economy is not in the best of shape, most observers continue to over-estimate weakness for H1.
Carney’s testimony today disappointed some as he appeared to be a tad stingy. If Carney would have come right out and targeted nominal GDP our spread would have come in for a bit, and then exploded. Carney will error to the side of generosity anyway; July is not that far off.
Robert Craven
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