Short Sterling – June 2010

Nicole Elliott from Mizuho Corporate Bank at 01/06/10

Comment: The UK yield curve is still incredibly steep with much tut-tut ting about deteriorating government finances. Benchmark ten-year Gilts yield 70 basis points over Germany, as do Portugal’s, while Italy and Norway’s are 75 basis points over. Short Sterling futures contracts look set for an imminent break to new highs, having consolidated in a neat step up from October’s ranges, possibly coinciding with this week’s MPC meeting.

Strategy: Buy at 99.080, adding to 99.000; stop below 98.950. First target 99.110, then 99.220, maybe 99.350.