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Market Talk – December 14, 2015

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A mixed session in Asia in what was very much an overhang from Friday’s session but also very weary of the Fed in two days time. It is interesting that European equities continue to trade heavy (DAX, CAC, FTSE -1.75%) into the Fed, despite Mario Draghi’s comment earlier this morning.

There are rising concerns about high-yielding bond funds. Last Thursday, the junk-bond fund managed by the investment firm Third Avenue Management moved to block investors from withdrawing their money. There is talk of other high-yielding bond funds who will also go into trouble with a Fed hike. This is part of the plea to the Fed not to hike rates, but they cannot hold back forever.

Oil was down (TWI around $34.25) earlier in the session but has recovered and made headway (currently +1.5% at $36.5) into the close of the U.S. trading. Nat-Gas remains heavy trading late in the day -5% at 1.89.

As we approach the Fed meeting tomorrow the market trades heavy in expectation of finally ending the ZIRP (Zero Interest Rate Environment), well in the USA anyway. Despite the sell-off in rates, the curve saw almost a parallel shift with 5’s through to 30’s all losing 8bp. Two-year notes were the exception with only a 6bp decline in price. 30yrs closed this evening still under the 3% mark closing at 2.965%. Europe fared a little better closing the day at (GDR/Bund) at 0.59%; closing the spread at +162bp.

Not too much to talk about in the FX market but GBP lost a little of the ground it made at the end of last week, closing 1.515 (-0.5%) today with the basket of currencies (DXY) closing at 97.65 (+0.23%). Gold traded heavy throughout the day eventually losing $12 and was last seen around $1062 per once.