The back end of the curve is extremely difficult to trade. Traders are given annual bonus targets and so they want to trade in the liquid volatile part of the curve (prompt, Summer 10 and Winter 10). The back end tends to dominated by trades which are done for compliance reasons. Producers may have excessive length and risk positions must be adjusted to ensure that risk limits are not breached. Banks often want exposure to the back end of the curve because it gives them a position in which to trade off, but also their risk models value the risk less than producers. Retailers also tend to have short term views on the market and struggle to get board approval for deals beyond 2 year deals. So the back end of the curve is often not even marked to market. However, with the curve in contango there is no reason why retailers do not highlight to their finance teams that the budget for 2011 should be 10% higher than 2009. read more ...