Euribor – June 2010

Nicole Elliott from Mizuho Corporate Bank at 01/07/10

Comment: Good to see that Euribor futures kept their cool despite Treasury yields backing up in thin year-end conditions; these moves in the Schatz and Bobls have started to reverse and should continue to do so. The March 2010 Euribor contract is trading at a new record high, through the ECB’s so-called target at 1.00%, and this one is trying to break above right-angled ‘triangle’ consolidation. The disconnect between the cash market, where Libor rates have been unchanged for ages, Treasuries and Euribor futures is such that one wonders who is living in a virtual world. 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 98.955, adding to 98.900; stop below 98.820. Next target 99.000, then 99.125/99.180.