Euribor – June 2010

Nicole Elliott from Mizuho Corporate Bank at 02/04/10

Comment: Almost €200B parked overnight at the ECB gives the lie to the idea that the money market is getting back to ‘normal’. Euribor open interest the highest in almost two years suggests plenty of hedging as bankers ponder the ECB’s next move. Despite talk of removing some stimulus measures we feel this is still a very long way off. Therefore futures contracts will continue to creep towards Libor (and Eurozone three-month offered rates six basis points higher than London’s). Price dips are seen as buying opportunities for an eventual move to new record highs around 99.300/99.350 (contract highs for Dec09 and Mar10).

Strategy: Buy at 99.035/99.015; stop below 98.950. Next target 99.125/99.150, then 99.225/99.300.