Pretty significant steepening during the Japanese hours yesterday. This happened due to USDJPY breaking the 100 level, triggering PRDC flows. Since the USD was strengthening, banks had to hedge by selling in the long end of the curve.
We had a meeting early on in the day in which our Head of Trading told us how such a thing was significant (trading-wise) and how it being Friday today, it was very likely that the direction triggered during American hours would continue and exaggerate without retracement.
Being prepared and taking trades on the lines of what was discussed in the meeting.
1. 10yr US treasury paused at a significant level (132.065), and had a small retracement. Was alert and took short in outright at this point.
Couple of ticks below, when it paused again, I thought I’ll play a small retracement yet again, but ended up making a SHORT 9 month spread. And almost within minutes, there was a spike down and my spread got blown. I did not make any money on the trade + missed the extra down move.
2. Took a 3 month steepener with 35 lots. And scalped 2 ticks on it! Also took the adjacent spread and scalped 1 tick on it with 50 lots.
Had positions in a 1yr fly and a 6 month fly, with 30 & 20 lots respectively. The 1 yr fly kept drifting into more loss, and still I did not get out. Partially this was because I took was making some money on the steepeners i took, and hence let my losses ride here, just hoping that the fly will revert. Never did I realise that I was down 30*7=210 ticks just on this position.
Need to ensure that I follow my rule of booking loss early, not just on outrights, but on any damn position! Had no business holding that position when it had broken some significant support levels.