Euribor – June 2010

Nicole Elliott from Mizuho Corporate Bank at 12/10/09

Comment: Five-year Bobls continue to outperform as investors opt for some yield rather than no yield. Last week’s volume in this contract was more than double the recent average, and volume across all contract months among the highest on record (and soaring open interest), suggesting many are belatedly realising that the target rate at 1.00% is not the floor for interest rates – the floor is currently 0.25%, the overnight deposit rate at the ECB. All eyes are on the supposedly ‘final’ one-year ECB tender on the 16th December, though they have announced that another six-month tender will be available in March. We still shall continue to allow for a rally to a new contract highs, in many Euribor futures, front September probably having the greatest upside potential.

Strategy: Buy at 98.880, adding to 98.800; stop below 98.740. First target 98.920/98.950, then 99.125/99.180.