Saturday, June 16, 2007

Yield Monkey's get ready to party

Once again the Stock market rallied and closed within 50 points of an all time new high. This occurred after the previous week in which stocks were under perssure (should I say Tremendous pressurre?)as fixed income prices were sent into a tailspin. Emerging Markets, as you can imagine, had a very positive week. Is this to continue? Well why not!? It seems to me that the Fed will not be changing rates for some time (look at Fed Fund futures they at at 94.73-75 all the way to May 09), as such we should be approaching a bottom in Eurodollar futures (as I believe these will trade range bound).Therefore Yield players should (and have been) be jumping back into the pool. I have maintained my short rate view in both Mexico, Brazil and Argentina. These plays have turned out very well. I continue to hold these positions but will look to cut down on Mexico (not out down!). As I have said in my posts many times Iceland and Turkey continue to have huge potential to apprciate.

A couple of things I have gotten wrong and have confused me.

1. China: I have been long dollars against this currency and the apprciation of the currency has been greater then I antcipated. I am currently square here and will sit on the sidelines until I can get a better handle on how quickly the currency will strengthen.
2. Euro: This is a currency I have had no luck with in recent months but one which I continue to battle. I have been both long and short and have managed to lose money both ways. From here I am long, seems to me that if EM does better the market will be selling dollars once again as earlier in the year. This is a currency I really want to correct. I will continue to have small positions in it until I crack this nut.

Also remember we are heading into vacation season. As such Yield will play an even bigger role. I will continue to attack my trades from a positive yield perspective and let the chips fall where they may. Let the Party begin!!!!




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