Euribor – June 2010

Nicole Elliott from Mizuho Corporate Bank at 01/13/10

Comment: Rallying through the ECB’s so-called target at 1.00%, propelled by a right-angled ‘triangle’ whose measured target is a minimum of 99.150 and more likely 99.300 (contract highs for Dec09 and Mar10). Interbank offered rates, having been stuck around 0.70%/0.75% for months, are edging lower – interestingly three-month Libor offered 5 basis points below the Eurozone’s 0.6825% (and can be produced via swaps for a lot less than that). We continue to favour rallies to new contract highs in many Euribor futures, front September probably having the greatest upside potential, as traders push to see how far they can test the ECB’s mettle.

Strategy: Buy at 99.0305, adding to 98.950; stop below 98.900. Next target 99.150, then 99.225.