GLOBAL INVESTMENT STRATEGY, EXECUTION AND RISK MANAGEMENT FOR INSTITUTIONAL INVESTORS

CHART OBSERVATIONS FX UPDATE AND EM BONDS.

 

•     The USD INDEX has potential to BASE especially on the weekly chart.

•     EUR USD is at KEY retracement SUPPORT 1.2167.

•     EUR GBP weekly is COILING for a major move.

•     USD JPY at the bottom end of the recent range.

•     USD ZAR is also poised to recover.

I provide our research notification below for your convenience:

 

Research Unbundling:

 

Astor Ridge does not provide independent research. We have no dedicated or paid strategists, research portals, or research subscriptions. However, you may receive unsolicited marketing communications from our Introducing Brokers from time to time, which may refer to specific trade recommendations. These recommendations are based solely on the opinion of the author, and are not official research recommendations of Astor Ridge.We have considered guidance from ESMA, and any written material from our Introducing Brokers that might fall within the scope of the rules will be provided for free, and made publicly available on our website, to any EU Investment firm that registers for it.

 

If you are a MiFID firm and do not agree with our approach, and instead believe that you must pay for written commentary or trade recommendations, then Astor Ridge will accept  payments determined by    you.

 

 

 

I also direct you to our disclaimer on our email footer:

This marketing was prepared by Christopher Williams, a consultant with Astor Ridge.  It is not appropriate to characterize this e-mail as independent investment research as referred to in MiFID and that it should be treated as a marketing communication even if it contains a trade recommendation. A history of marketing materials and research reports can be provided upon request in compliance with the European Commission’s Market Abuse Regulation.  Astor Ridge takes no proprietary trading risk, has no market making facilities, and has no position in any security we discuss in this e-mail.  The views in this e-mail are those of the author(s) and are subject to change, and Astor Ridge has no obligation to update its opinions or the information in this publication. If this e-mail contains opinions or recommendations, those opinions or recommendations reflect solely and exclusively those of the author, and such opinions were prepared independently of any other interests, including those of Astor Ridge and/or its affiliates. This publication does not constitute personal investment advice or take into account the individual financial circumstances or objectives of the those who receive it. The securities discussed herein may not be suitable for all investors. Astor Ridge recommends that investors independently evaluate each issuer, security or instrument discussed herein, and consult any independent advisors they believe necessary. The value of, and income from, any investment may fluctuate from day to day as a result of changes in relevant economic markets (including changes in market liquidity). The information herein is not intended to predict actual results, which may differ substantially from those reflected. Past performance is not necessarily indicative of future results. 

 

You should not use or disclose to any other person the contents of this e-mail or its attachments (if any), nor take copies. This e-mail is not a representation or warranty and is not intended nor should it be taken to create any legal relations, contractual or otherwise. This e-mail and any files transmitted with it are confidential, may be legally privileged, and are for the sole use of the intended recipient. Copyright in this e-mail and any accompanying document created by Astor Ridge LLP is owned by Astor Ridge LLP. 

 

Astor Ridge LLP is regulated by the Financial Conduct Authority (FCA):  Registration Number 579287

Astor Ridge LLP is Registered in England and Wales with Companies House:  Registration Number OC372185

Astor Ridge NA LLP is a member of FINRA/SIPC:  CRD Number 282626

Astor Ridge NA LLP is a member of the National Futures Association (NFA):  Firm ID Number 0499303

Astor Ridge NA LLP is Registered in England and Wales with Companies House:  Registration Number OC401796

 

 

If there is anything else you require from us to continue receiving our market communications, or prefer a different medium for access (e.g. publicly available password protected access on the Astor Ridge website), please do let me know.

 

Otherwise, if you are more comfortable to deem consent by simply acknowledging receipt of this email, and continuing our trading relationship under our updated terms of business below, without registering your disapproval, we are happy to proceed on that basis.

 

Many thanks,

 

Chris

 

 

 

 

BONDS UPDATE :

Yields continue to rise DESPITE MAJOR RSI dislocations REMAIN. ALL durations are stretched, quarterly, monthly, weekly and daily… this is RARE!

All parts of the US curve have yields above multiyear trend lines BUT the 5yr is now TOO EXTEND. See pages 11-14.

US curves continue the struggle to find a base but the RSI’s are now VERY LOW.

Germany bonds are struggling to base despite the RSI’s.

UK yields have a LOFTY RSI.

US 10 Breakevens have a LOFTY WEEKLY and DAILY RSI.

•      

•       I provide our research notification below for your convenience:

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•      Research Unbundling:

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•      Astor Ridge does not provide independent research. We have no dedicated or paid strategists, research portals, or research subscriptions. However, you may receive unsolicited marketing communications from our Introducing Brokers from time to time, which may refer to specific trade recommendations. These recommendations are based solely on the opinion of the author, and are not official research recommendations of Astor Ridge.We have considered guidance from ESMA, and any written material from our Introducing Brokers that might fall within the scope of the rules will be provided for free, and made publicly available on our website, to any EU Investment firm that registers for it.

•       

•      If you are a MiFID firm and do not agree with our approach, and instead believe that you must pay for written commentary or trade recommendations, then Astor Ridge will accept  payments determined by    you.

•       

•       

•       

•      I also direct you to our disclaimer on our email footer:

•      This marketing was prepared by Christopher Williams, a consultant with Astor Ridge.  It is not appropriate to characterize this e-mail as independent investment research as referred to in MiFID and that it should be treated as a marketing communication even if it contains a trade recommendation. A history of marketing materials and research reports can be provided upon request in compliance with the European Commission’s Market Abuse Regulation.  Astor Ridge takes no proprietary trading risk, has no market making facilities, and has no position in any security we discuss in this e-mail.  The views in this e-mail are those of the author(s) and are subject to change, and Astor Ridge has no obligation to update its opinions or the information in this publication. If this e-mail contains opinions or recommendations, those opinions or recommendations reflect solely and exclusively those of the author, and such opinions were prepared independently of any other interests, including those of Astor Ridge and/or its affiliates. This publication does not constitute personal investment advice or take into account the individual financial circumstances or objectives of the those who receive it. The securities discussed herein may not be suitable for all investors. Astor Ridge recommends that investors independently evaluate each issuer, security or instrument discussed herein, and consult any independent advisors they believe necessary. The value of, and income from, any investment may fluctuate from day to day as a result of changes in relevant economic markets (including changes in market liquidity). The information herein is not intended to predict actual results, which may differ substantially from those reflected. Past performance is not necessarily indicative of future results. 

•       

•      You should not use or disclose to any other person the contents of this e-mail or its attachments (if any), nor take copies. This e-mail is not a representation or warranty and is not intended nor should it be taken to create any legal relations, contractual or otherwise. This e-mail and any files transmitted with it are confidential, may be legally privileged, and are for the sole use of the intended recipient. Copyright in this e-mail and any accompanying document created by Astor Ridge LLP is owned by Astor Ridge LLP. 

•       

•      Astor Ridge LLP is regulated by the Financial Conduct Authority (FCA):  Registration Number 579287

•      Astor Ridge LLP is Registered in England and Wales with Companies House:  Registration Number OC372185

•      Astor Ridge NA LLP is a member of FINRA/SIPC:  CRD Number 282626

•      Astor Ridge NA LLP is a member of the National Futures Association (NFA):  Firm ID Number 0499303

•      Astor Ridge NA LLP is Registered in England and Wales with Companies House:  Registration Number OC401796

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•       

•      If there is anything else you require from us to continue receiving our market communications, or prefer a different medium for access (e.g. publicly available password protected access on the Astor Ridge website), please do let me know.

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•      Otherwise, if you are more comfortable to deem consent by simply acknowledging receipt of this email, and continuing our trading relationship under our updated terms of business below, without registering your disapproval, we are happy to proceed on that basis.

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•      Many thanks,

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•      Chris

 

 

•     Are stocks HOLED below the water line and slowly sinking? The big problem with this statement is that we really need to see the monthly closes, which is a long way off. This week’s settlements may offer a few hints to straddle the time gap.

•     US stocks remain the most over bought and many have recovered MORE than 200% of the 2008-2009 correction.

•     The DOW and S&P have major RSI dislocations spread across monthly, weekly and daily durations! This is a DANGEROUS combination.

•     Some RSI’s surpass 1950 and 1980 levels.

•     US stocks highlight the most CONCERN.

•      

•       I provide our research notification below for your convenience:

•       

•      Research Unbundling:

•       

•      Astor Ridge does not provide independent research. We have no dedicated or paid strategists, research portals, or research subscriptions. However, you may receive unsolicited marketing communications from our Introducing Brokers from time to time, which may refer to specific trade recommendations. These recommendations are based solely on the opinion of the author, and are not official research recommendations of Astor Ridge.We have considered guidance from ESMA, and any written material from our Introducing Brokers that might fall within the scope of the rules will be provided for free, and made publicly available on our website, to any EU Investment firm that registers for it.

•       

•      If you are a MiFID firm and do not agree with our approach, and instead believe that you must pay for written commentary or trade recommendations, then Astor Ridge will accept  payments determined by    you.

•       

•       

•       

•      I also direct you to our disclaimer on our email footer:

•      This marketing was prepared by Christopher Williams, a consultant with Astor Ridge.  It is not appropriate to characterize this e-mail as independent investment research as referred to in MiFID and that it should be treated as a marketing communication even if it contains a trade recommendation. A history of marketing materials and research reports can be provided upon request in compliance with the European Commission’s Market Abuse Regulation.  Astor Ridge takes no proprietary trading risk, has no market making facilities, and has no position in any security we discuss in this e-mail.  The views in this e-mail are those of the author(s) and are subject to change, and Astor Ridge has no obligation to update its opinions or the information in this publication. If this e-mail contains opinions or recommendations, those opinions or recommendations reflect solely and exclusively those of the author, and such opinions were prepared independently of any other interests, including those of Astor Ridge and/or its affiliates. This publication does not constitute personal investment advice or take into account the individual financial circumstances or objectives of the those who receive it. The securities discussed herein may not be suitable for all investors. Astor Ridge recommends that investors independently evaluate each issuer, security or instrument discussed herein, and consult any independent advisors they believe necessary. The value of, and income from, any investment may fluctuate from day to day as a result of changes in relevant economic markets (including changes in market liquidity). The information herein is not intended to predict actual results, which may differ substantially from those reflected. Past performance is not necessarily indicative of future results. 

•       

•      You should not use or disclose to any other person the contents of this e-mail or its attachments (if any), nor take copies. This e-mail is not a representation or warranty and is not intended nor should it be taken to create any legal relations, contractual or otherwise. This e-mail and any files transmitted with it are confidential, may be legally privileged, and are for the sole use of the intended recipient. Copyright in this e-mail and any accompanying document created by Astor Ridge LLP is owned by Astor Ridge LLP. 

•       

•      Astor Ridge LLP is regulated by the Financial Conduct Authority (FCA):  Registration Number 579287

•      Astor Ridge LLP is Registered in England and Wales with Companies House:  Registration Number OC372185

•      Astor Ridge NA LLP is a member of FINRA/SIPC:  CRD Number 282626

•      Astor Ridge NA LLP is a member of the National Futures Association (NFA):  Firm ID Number 0499303

•      Astor Ridge NA LLP is Registered in England and Wales with Companies House:  Registration Number OC401796

•       

•       

•      If there is anything else you require from us to continue receiving our market communications, or prefer a different medium for access (e.g. publicly available password protected access on the Astor Ridge website), please do let me know.

•       

•      Otherwise, if you are more comfortable to deem consent by simply acknowledging receipt of this email, and continuing our trading relationship under our updated terms of business below, without registering your disapproval, we are happy to proceed on that basis.

•       

•      Many thanks,

•       

•      Chris

 

 

Italy Sell Old 10y into High coupon 9y, narrowing credit spread and supply trade   Mechanics +€50k Btps 7.25% Nov26, +50MM -€50k Btps 2.05% Aug27, -58MM   @-19.2bp Entry @ -18bp   Target -24bp, based on the narrowing credit spread we see the Nov26 as having underperformed beyond the average yield spread Stop @-15 Bloomgberg Yield History     Bloomberg Value vs Par curve (GOVY)     Rationale Trade has ‘hidden value’ due to low modified duration of the Btps 11/26 in positively sloped curve Trade is on historical extremes vs model: Nov26 +1/02 Std Dev cheap, Aug27 -1.76 Std Dev rich to 3m spline model Supply in the New Btps Feb 28 at end of month, which look cheap to Aug27s (+10.3bp), could cause Aug27 to cheapen As the credit (It/Ge) has narrowed significantly in the last two months, the high coupons should outperform, reflecting a lower probability of Default already implicit in spread to Germany   Roll & Carry (per 3mo) Carry +0.7bp (-15bp repo spread) Roll: +1.2bp   Risks A significant widening in It/Ge causes the high coupon to underperform Structural cheapness of Italian 10yrs attracts buyers of on the run issuers

 

 

James Rice

 

image001.jpg@01D21F13.B69A4950">Ital

UK: 14-16 Dowgate Hill, London ec4r 2su

US: 245 Park Ave 39^th Fl, New York NY 10167

 

Office:   +44 (0) 203 - 143 - 4178

Mobile:  +44 (0) 754 - 011 - 7705

Email:     James.Rice@AstorRidge.com

Web:       www.AstorRidge.com

 

This marketing was prepared by James Rice, a consultant with Astor Ridge.  It is not appropriate to characterize this e-mail as independent investment research as referred to in MiFID and that it should be treated as a marketing communication even if it contains a trade recommendation. A history of marketing materials and research reports can be provided upon request in compliance with the European Commission’s Market Abuse Regulation.  Astor Ridge takes no proprietary trading risk, has no market making facilities, and has no position in any security we discuss in this e-mail.  The views in this e-mail are those of the author(s) and are subject to change, and Astor Ridge has no obligation to update its opinions or the information in this publication. If this e-mail contains opinions or recommendations, those opinions or recommendations reflect solely and exclusively those of the author, and such opinions were prepared independently of any other interests, including those of Astor Ridge and/or its affiliates. This publication does not constitute personal investment advice or take into account the individual financial circumstances or objectives of the those who receive it. The securities discussed herein may not be suitable for all investors. Astor Ridge recommends that investors independently evaluate each issuer, security or instrument discussed herein, and consult any independent advisors they believe necessary. The value of, and income from, any investment may fluctuate from day to day as a result of changes in relevant economic markets (including changes in market liquidity). The information herein is not intended to predict actual results, which may differ substantially from those reflected. Past performance is not necessarily indicative of future results. 

 

You should not use or disclose to any other person the contents of this e-mail or its attachments (if any), nor take copies. This e-mail is not a representation or warranty and is not intended nor should it be taken to create any legal relations, contractual or otherwise. This e-mail and any files transmitted with it are confidential, may be legally privileged, and are for the sole use of the intended recipient. Copyright in this e-mail and any accompanying document created by Astor Ridge LLP is owned by Astor Ridge LLP. 

 

Astor Ridge LLP is regulated by the Financial Conduct Authority (FCA):  Registration Number 579287

Astor Ridge LLP is Registered in England and Wales with Companies House:  Registration Number OC372185

Astor Ridge NA LLP is a member of FINRA/SIPC:  CRD Number 282626

Astor Ridge NA LLP is a member of the National Futures Association (NFA):  Firm ID Number 0499303

Astor Ridge NA LLP is Registered in England and Wales with Companies House:  Registration Number OC401796

 

 

 

 

Looking for the last vestiges of Credit flattening in France vs Swaps   Mechanics Sell 19MM Frtr May45 vs Buy 16.2MM Frtr May66 (€50k/01) vs MMS   Target entry @ +29.5bp Add @ +31.5bp Trade Target +26.5bp Stop @ +34bp   Spread of Spreads  - (BBG)     Changes in Swap Spreads in France vs 6m average       Rationale Recent 66s issuance has left an overhang on the market – leaving us with an opportunity As long end (30y) has outperformed both shorter tenors and other core issuers the 66s haven’t fully reflected the move France as a super-performing credit and has had a generic flattening, across most of the curve vs swaps The 2045 vs 2066 relatively has been left behind by the rising tide of spread flattening The 2045 have had an empathetic bid from the outperformance of the benchmark 30y In aggressing this spread of spreads we are trying to grab the last vestiges of the spread flattening. In the longs it has failed to keep up with the generic move – the Ultra long France 66s have strong convexity characteristics   50y supply Tap Dates of 66s 3 Bln, Apr 2016 1.4 Bln, Sep 2016 1.4 Bln, Dec 2016 1 Bln, Feb 2017 2.3 Bln, Jan 2018 so we have seen a recent large tap and expect no further issuance in the near future     Risks We see a significant widening in generic and/or French specific credit conditions The ultra-long sector of France continues to underperform from issuance or further selling – see issuance schedule above

 

 

James Rice

 

image001.jpg@01D21F13.B69A4950">

UK: 14-16 Dowgate Hill, London ec4r 2su

US: 245 Park Ave 39^th Fl, New York NY 10167

 

Office:   +44 (0) 203 - 143 - 4178

Mobile:  +44 (0) 754 - 011 - 7705

Email:     James.Rice@AstorRidge.com

Web:       www.AstorRidge.com

 

This marketing was prepared by James Rice, a consultant with Astor Ridge.  It is not appropriate to characterize this e-mail as independent investment research as referred to in MiFID and that it should be treated as a marketing communication even if it contains a trade recommendation. A history of marketing materials and research reports can be provided upon request in compliance with the European Commission’s Market Abuse Regulation.  Astor Ridge takes no proprietary trading risk, has no market making facilities, and has no position in any security we discuss in this e-mail.  The views in this e-mail are those of the author(s) and are subject to change, and Astor Ridge has no obligation to update its opinions or the information in this publication. If this e-mail contains opinions or recommendations, those opinions or recommendations reflect solely and exclusively those of the author, and such opinions were prepared independently of any other interests, including those of Astor Ridge and/or its affiliates. This publication does not constitute personal investment advice or take into account the individual financial circumstances or objectives of the those who receive it. The securities discussed herein may not be suitable for all investors. Astor Ridge recommends that investors independently evaluate each issuer, security or instrument discussed herein, and consult any independent advisors they believe necessary. The value of, and income from, any investment may fluctuate from day to day as a result of changes in relevant economic markets (including changes in market liquidity). The information herein is not intended to predict actual results, which may differ substantially from those reflected. Past performance is not necessarily indicative of future results. 

 

You should not use or disclose to any other person the contents of this e-mail or its attachments (if any), nor take copies. This e-mail is not a representation or warranty and is not intended nor should it be taken to create any legal relations, contractual or otherwise. This e-mail and any files transmitted with it are confidential, may be legally privileged, and are for the sole use of the intended recipient. Copyright in this e-mail and any accompanying document created by Astor Ridge LLP is owned by Astor Ridge LLP. 

 

Astor Ridge LLP is regulated by the Financial Conduct Authority (FCA):  Registration Number 579287

Astor Ridge LLP is Registered in England and Wales with Companies House:  Registration Number OC372185

Astor Ridge NA LLP is a member of FINRA/SIPC:  CRD Number 282626

Astor Ridge NA LLP is a member of the National Futures Association (NFA):  Firm ID Number 0499303

Astor Ridge NA LLP is Registered in England and Wales with Companies House:  Registration Number OC401796

 

 

Trade:  Buy UKT 4.5 12/42 vs UKT 4 1/60 @ +20.3 bps:

 

 

Stop – 21.3 bps

Target – 17.0 bps

 

 

Rationale:

 

1. The 42s60s has exhibited mean reverting behaviour with the 2yr range mostly between -13 to -20 bps
2. The -20 area has previously held 4 times, the last time during November’s massive linker index extension; it also held in the aftermath of Brexit
3. We have the UKT 57s tap on 15^th Feb which should cheapen up the 55s and 60s around it
4. The trade earns positive carry of nearly 1bp per quarter (i.e. UKT 42s60s 1yr forward = -24.0 bps)
5. The DMO held back £600mm from the UKTi48s syndication; this could be used for a mini-tender before the end of March (68s a likely candidate given recent DMO meeting minutes)
6. The 42s are near the peak of the curve and enjoy positive roll, whereas 60s roll negatively and are the richest ultra long on Z spread:

 

 

Risks / Characteristics of Trade:

 

1. Dovish – the Sonia curve is currently pricing 40% chance of May hike and 80% chance of hike by August – should Carney reiterate his “2 hikes in 3 years” endorsement from November at today’s MPC meeting, or focus on economic uncertainty around Brexit, we could see a corrective steepening of the 20bps flattening of UKT 10s30s since beginning of January (which should also steepen 30s50s)
2. Bullish – the chart below shows the fairly close correlation between UKT 42s60s and yield levels on UKT 60s:

 

White Line – UKT 42s60s (rhs)

Orange Line – UKT 60s yield (lhs – inverted)

 

 

Should UKT 60s break the 1yr highs of 1.80, this 42s60s curve could invert further.

 

3. Z spread – the 42s60s has been more inverted on Z spread in the past:

 

 

This is mainly due to the recent richening of ultra long end ASWs resulting from the unwinding of LDI receiving hedges.

 

 

 

Jim Lockard

Founder / Managing Partner

image001.jpg@01D21F14.8E7A1C60">

UK: 14-16 Dowgate Hill, London ec4r 2su

US: 245 Park Ave 39^th Fl, New York NY 10167

Office: +44 (0) 203 -143 - 4172

Mobile: +44 (0) 7795-027-865

Email:  jim.lockard@astorridge.com

Website:  www.astorridge.com

 

This commentary was prepared by Jim Lockard, a Managing Partner at Astor Ridge. It is not appropriate to characterize this e-mail as independent investment research as referred to in MiFID and it should be treated as a marketing communication even if it contains a research recommendation. A history of his commentary can be provided upon request in compliance with the European Commission’s Market Abuse Regulation. Astor Ridge does not engage in market making or proprietary trading, and has no position in any security discussed in this e-mail.  The views in this e-mail are those of the author(s) and are subject to change.. Any recommendations contained herein reflect solely those of the author and were prepared independently of Astor Ridge or its affiliates. This publication does not constitute personal investment advice and may not be suitable for all investors. Astor Ridge recommends that investors independently evaluate recommendations discussed herein. Actual investment returns may fluctuate as a result of changes in economic and market conditions (including market liquidity). Past performance is not necessarily indicative of future results.

You should not use or disclose to any other person the contents of this e-mail or its attachments (if any), nor take copies. This e-mail is not a representation or warranty and is not intended nor should it be taken to create any legal relations, contractual or otherwise. This e-mail and any files transmitted with it are confidential, may be legally privileged, and are for the sole use of the intended recipient. Copyright in this e-mail and any accompanying document created by us is owned by us. 

 

Astor Ridge LLP is regulated by the Financial Conduct Authority (FCA):  Registration Number 579287

Astor Ridge LLP is Registered in England and Wales with Companies House:  Registration Number OC372185

Astor Ridge NA LLP is a member of FINRA/SIPC:  CRD Number 282626

Astor Ridge NA LLP is a member of the National Futures Association (NFA): Firm ID 0499303

Astor Ridge NA LLP is Registered in England and Wales with Companies House:  Registration Number OC401796

 

Gilts... Inflation Report On Tap

> No shortage of opinions on the outcome today but the consensus looks like 'rate hikes coming but no hurry' with a 7-2 vote on a rate hike, both of which seem to be priced into the market.

> Dec MPC - Spot Sonia is 32.1bps this am which prices in 1.28 25bps rate hikes this year, off from a high of 36.3bps (1.45 hikes) last Fri. So, the 'boundaries' would appear to be ~36.5bps on the upside and 25bps on the downside (1.5 hikes vs 1 hike).

> Our belly steepeners are at their s/term highs (7/22-9/24 ~21.9bps vs 19.2bps entry) and 10yr gilts remain at their cheapest levels on the curve (vs 22s and 37s) after last night's disappointing  UST 10yr note auction. While a dovish bias would be bullish for the short end, we'd still expect G H8 to see solid short-covering too, richening this fly, especially given how much 27-37s has flattened (even with bounce Mon/Tues).

> Inflation breakevens in the UK remain well bid, now at their s/term wides, levels that were resistance in Nov. Structural needs remain supportive but softer than expected inflation ests today could prompt some profit taking.

Charts:

 

 

 

image009.jpg@01D28D1B.42BD95C0">

 

Mark Funsch

 

O:            +44 (0) 203 - 143 - 4177

M:            +44 (0) 789 - 996 - 4051

E:             Mark.Funsch@AstorRidge.com

W:            www.AstorRidge.com

UK:          14-16 Dowgate Hill, London UK EC4R 2SU

US:          245 Park Ave, 39^th Floor, NY, NY, 10167

 

This research was prepared by Mark Funsch.  He is a consultant with Astor Ridge.  A history of his marketing commentaries can be provided upon request in compliance with the European Commission’s Market Abuse Regulation.  Astor Ridge takes no proprietary trading risk, has no market making facilities, and has no position in any security we discuss in this e-mail.  The views in this e-mail are those of the author(s) and are subject to change, and Astor Ridge has no obligation to update its opinions or the information in this publication. If this e-mail contains recommendations, those recommendations reflect solely and exclusively those of the author, and such opinions were prepared independently of any other interests, including those of Astor Ridge and/or its affiliates. This publication does not constitute personal investment advice or take into account the individual financial circumstances or objectives of the clients who receive it. The securities discussed herein may not be suitable for all investors. Astor Ridge recommends that investors independently evaluate each issuer, security or instrument discussed herein, and consult any independent advisors they believe necessary. The value of and income from any investment may fluctuate from day to day as a result of changes in relevant economic markets (including changes in market liquidity). The information herein is not intended to predict actual results, which may differ substantially from those reflected. Past performance is not necessarily indicative of future results. 

 

You should not use or disclose to any other person the contents of this e-mail or its attachments (if any), nor take copies. This e-mail is not a representation or warranty and is not intended nor should it be taken to create any legal relations, contractual or otherwise. This e-mail and any files transmitted with it are confidential, may be legally privileged, and are for the sole use of the intended recipient. Copyright in this e-mail and any accompanying document created by Astor Ridge LLP is owned by Astor Ridge LLP. 

 

Astor Ridge LLP is regulated by the Financial Conduct Authority (FCA):  Registration Number 579287

Astor Ridge LLP is Registered in England and Wales with Companies House:  Registration Number OC372185

Astor Ridge NA LLP is a member of FINRA/SIPC:  CRD Number 282626

Astor Ridge NA LLP is a member of the National Futures Association (NFA):  Firm ID Number 0499303

Astor Ridge NA LLP is Registered in England and Wales with Companies House:  Registration Number OC401796

 

•     The USD INDEX has potential to BASE especially on the weekly chart.

•     EUR USD is at KEY retracement RESISTANCE 1.2598.

•     USD ZAR is also poised to recover.

I provide our research notification below for your convenience:

 

Research Unbundling:

 

Astor Ridge does not provide independent research. We have no dedicated or paid strategists, research portals, or research subscriptions. However, you may receive unsolicited marketing communications from our Introducing Brokers from time to time, which may refer to specific trade recommendations. These recommendations are based solely on the opinion of the author, and are not official research recommendations of Astor Ridge.We have considered guidance from ESMA, and any written material from our Introducing Brokers that might fall within the scope of the rules will be provided for free, and made publicly available on our website, to any EU Investment firm that registers for it.

 

If you are a MiFID firm and do not agree with our approach, and instead believe that you must pay for written commentary or trade recommendations, then Astor Ridge will accept  payments determined by    you.

 

 

I also direct you to our disclaimer on our email footer:

This marketing was prepared by Christopher Williams, a consultant with Astor Ridge.  It is not appropriate to characterize this e-mail as independent investment research as referred to in MiFID and that it should be treated as a marketing communication even if it contains a trade recommendation. A history of marketing materials and research reports can be provided upon request in compliance with the European Commission’s Market Abuse Regulation.  Astor Ridge takes no proprietary trading risk, has no market making facilities, and has no position in any security we discuss in this e-mail.  The views in this e-mail are those of the author(s) and are subject to change, and Astor Ridge has no obligation to update its opinions or the information in this publication. If this e-mail contains opinions or recommendations, those opinions or recommendations reflect solely and exclusively those of the author, and such opinions were prepared independently of any other interests, including those of Astor Ridge and/or its affiliates. This publication does not constitute personal investment advice or take into account the individual financial circumstances or objectives of the those who receive it. The securities discussed herein may not be suitable for all investors. Astor Ridge recommends that investors independently evaluate each issuer, security or instrument discussed herein, and consult any independent advisors they believe necessary. The value of, and income from, any investment may fluctuate from day to day as a result of changes in relevant economic markets (including changes in market liquidity). The information herein is not intended to predict actual results, which may differ substantially from those reflected. Past performance is not necessarily indicative of future results. 

 

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Chris

The 1h26-4q27 yield spread peaked at 10.8 bps into Sep ’17 delivery, but worth scaling in at current levels given how much flatter the curve is now…

While I think a May rate hike is unlikely, this would have the added benefit of richening futures (via higher IRR) and flattening the curve.

The main risk to the trade is exclusion of the CTD 4q27s from the March APF redemption reinvestment, although this is well advertised.

 

Trade:  Sell UKT 1.5 7/26 basis at -10.2 bps vs G H8 (CTD 4q 12/27) at IRR of .12:

 

 

Borrow the 1h26 at 0.35 in term repo to 29^th March (current market 0.38/0.35)

 

è> Long UKT 4q27 @ +10.7 bps vs UKT 1h26 on 29^th March

 

2yr History

Red – UKT 1h26-4q27 Yield Spread (rt axis)

Blue – CTD 4q27 Yield (lt axis)

Violet – UKT 1h26-4q27 Z Spread

 

 

Rationale:

 

1. You enter the 1h26-4q27 flattener at recent highs near 11 bps
2. The last time the spread was steeper (12 bps) was in Aug-Nov 2016, when QE was announced (4q27s were excluded) and BEFORE 4q27s became CTD in March 2017
3. 4q27s will continue to be CTD until March 2019, which should give them a repo premium, liquidity premium, and squeeze risk premium in delivery months
4. 4q27s are a very low float bond, which increases their scarcity value into delivery months
5. The March Gilt contract is very cheap to 4q27, trading near .10 IRR, which is the effective repo floor on the 4q27 (given GEMMS can borrow the issue from the DMO at this rate)
6. Positive carry at the current repo spread of 25 bps = 0.25 bps per month
7. The trade performs well into a delivery squeeze, with an option to roll contracts to June at attractive levels, should the deferred IRR trade rich
8. The UKT 4q27 are at cheapest level on the curve since 2016 QE announcement:

 

UKT 25s27s30s bfly:

 

 

RISKS:

 

The 4q27s will be excluded from the upcoming 5’18 redemption APF reinvestment, which may cause it to stay cheap on the curve. Offsetting that is the scarcity of the 4q27 (7.6bn tradeable float, compared to 19.9bn of 1h26) as we enter March delivery. It is noteworthy that 13.5bn 4q27s have already been delivered into the contract since March  2017, potentially increasing the scarcity value.

 

Short term, the 1h26-4q27 spread is directional, with the contract leading the way (e.g. 26s27s have recently bear steepened). This can be seen in graph above (blue line = 4q27 yield).

Prior to 4q27 being CTD, the correlation was reversed, with 26s27s bull steepening and bear flattening.

If you think we could make new highs in yields above the 2016 1.80 peak in 4q27, then it might make sense to wait for better entry levels.

 

 

Jim Lockard

Founder / Managing Partner

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•     Although the US stocks are not open yet here are a few levels to watch for when they are.

•     Yesterday witnessed a major drop, immediately forcing ALL daily charts into an oversold state. This is not the best time of the month to make BOLD statements but any subsequent weak closes this month will confirm a MUCH GREATER and MORE COMPREHENSIVE failure. We have been over stretched for some time at difficult levels.

•     US stocks remain the most over bought and many have recovered MORE than 200% of the 2008-2009 correction.

•     The DOW and S&P have major RSI dislocations spread across monthly, weekly and daily durations! This is a DANGEROUS combination.

•     Some RSI’s surpass 1950 and 1980 levels.

•     US stocks highlight the most CONCERN.

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I also direct you to our disclaimer on our email footer:

This marketing was prepared by Christopher Williams, a consultant with Astor Ridge.  It is not appropriate to characterize this e-mail as independent investment research as referred to in MiFID and that it should be treated as a marketing communication even if it contains a trade recommendation. A history of marketing materials and research reports can be provided upon request in compliance with the European Commission’s Market Abuse Regulation.  Astor Ridge takes no proprietary trading risk, has no market making facilities, and has no position in any security we discuss in this e-mail.  The views in this e-mail are those of the author(s) and are subject to change, and Astor Ridge has no obligation to update its opinions or the information in this publication. If this e-mail contains opinions or recommendations, those opinions or recommendations reflect solely and exclusively those of the author, and such opinions were prepared independently of any other interests, including those of Astor Ridge and/or its affiliates. This publication does not constitute personal investment advice or take into account the individual financial circumstances or objectives of the those who receive it. The securities discussed herein may not be suitable for all investors. Astor Ridge recommends that investors independently evaluate each issuer, security or instrument discussed herein, and consult any independent advisors they believe necessary. The value of, and income from, any investment may fluctuate from day to day as a result of changes in relevant economic markets (including changes in market liquidity). The information herein is not intended to predict actual results, which may differ substantially from those reflected. Past performance is not necessarily indicative of future results. 

 

You should not use or disclose to any other person the contents of this e-mail or its attachments (if any), nor take copies. This e-mail is not a representation or warranty and is not intended nor should it be taken to create any legal relations, contractual or otherwise. This e-mail and any files transmitted with it are confidential, may be legally privileged, and are for the sole use of the intended recipient. Copyright in this e-mail and any accompanying document created by Astor Ridge LLP is owned by Astor Ridge LLP. 

 

Astor Ridge LLP is regulated by the Financial Conduct Authority (FCA):  Registration Number 579287

Astor Ridge LLP is Registered in England and Wales with Companies House:  Registration Number OC372185

Astor Ridge NA LLP is a member of FINRA/SIPC:  CRD Number 282626

Astor Ridge NA LLP is a member of the National Futures Association (NFA):  Firm ID Number 0499303

Astor Ridge NA LLP is Registered in England and Wales with Companies House:  Registration Number OC401796

 

 

If there is anything else you require from us to continue receiving our market communications, or prefer a different medium for access (e.g. publicly available password protected access on the Astor Ridge website), please do let me know.

 

Otherwise, if you are more comfortable to deem consent by simply acknowledging receipt of this email, and continuing our trading relationship under our updated terms of business below, without registering your disapproval, we are happy to proceed on that basis.

 

Many thanks,

 

Chris