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Strategies & Market Trends : January Effect 2003
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To: Q. who started this subject12/23/2002 8:45:14 AM
From: RockyBalboa  Read Replies (1) of 666
 
As part of the coming January effect, I have completed short positions in various Treasuries (USD and EUR).
The mopping up of Treasury prices is driven by covering hedges at a tax loss against unrealised bond positions, and well, also as a likely shortlived means to shore up the prices of the underlying deliverables by pulling ahead the futures. This is done in order to allow german insurers to show a bit less ugly balance sheets as at end of 2002.

If it is a bubble (and I suppose it is) then it is the time to sell it now. While some value arb types might think especially Euro debt is cheap, I disagree. Besides that, any appearance of a January effect (by switching debt money into equity) shall jam the bonds down in short order.

I sold the following instruments: US30Y (111 and over), US10Y, German 10Y (112.8 and over) and German 5Y. As a small hedge, I took in money markets in USD and EUR (3 months each).
For profit taking, I wouldn't close any of those below a 50bps gain (in base interest rate).

It may require some averaging if in the coming week the thin market jumps up (but I'm not sure about an end of year mark).

The oil contract is now bid 31.25, up another dollar, and analysts shall wake up and adjust their inflation numbers.
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