Wednesday, April 11, 2007

Markets continue to move along

The markets for the past few days has been extremely slow. Positive carry trades are certainly looking good but are we approaching levels to get out? Mexican rates are very flat 10 year yield at 7.90% while o/n is at 7.45% (2year at 7.58%!). Although I still have the flattening trade on I am not going to add to it until I feel that the Mexican Central Bank is looking to cut rates. This is not the case right now. A similar story is also occuring in Argentina. This trade has preformed very well for me. I have been short dollrs both spot and forward for months now. The curve has flattened tremendously and spot has drifted lower. I still think there is value further out along the curve (the 2 year sector) but I would be running any short dollar postion against a long dollar postion in the 2-3 month area (while keeping tiny short dollars spot only 20-25% of my normal NOP).

Shortly we will be getting the minutes from the latest FOMC meeting. I expect that they will be slightly more hawkish then previously thought so I am looking for dollar futures to suffer while the dollar might do slightly better. We will see in a few hours.

Good Luck and Good Forex trading.



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