Global Yields Confirm -ASC; other FI TECH OUTLOOK -1stBOS; IPO - TIP 50d correlation; short POSITIONS moving OFFSIDES and overnight (ie ASIA) buyin' dip
I’m just leaving these here as I’ve not had time to put pieces of the puzzle together today …
First is a more TECHNICAL view of rates,
While it shows CLEAR horizontal TLINE BREAKS, it ends by noting visuals of 10s (TNX), Bunds and GILTS
And concludes with a bit of word salad,
… On the flip side, if we see these moves from the UK and Germany start to fail and fall back into the former ranges, then we’re likely to see the same from the US. And guess what… All of those breakouts in bank stocks are probably failing too.
The bottom line is when studying the bond market and the intermarket landscape, we can look for confirming action or the lack thereof from international credit markets.
For now, it appears the US and developed European bond markets are in agreement. Banks in the US and abroad are also confirming the recent action.
If these new highs from banks and yields around the globe begin to fail, it will be time to sit up and take notice. That would likely be occurring in an environment where the US 10-year is falling back beneath 1.75%.
But for now, these breakouts appear to be valid and that’s a very bullish development. If that changes, we’ll be right here talking about it.
Be sure to check back! …
On the one hand. Then on the OTHER hand … For NOW … Even the technician’s hedging a view. AND they go on to detail the ‘countdown to FOMC’ and hike odds. I’ll be sure to check back … thanks for that.
For those attempting to play along at home with REAL FI technicals, these hit earlier this afternoon from the guys formerly known as First Boston,
10yy WEEKLY visual …
AND what they are thinking,
Short-term Strategy: We stay tactically bearish, expecting a move to support at 1.965/2.00%, with short-term resistance moving substantially higher to 1.79%. We would stay tactically bearish whilst the market holds above here into the close.
On 5yy (DAILY)
AND what they are thinking,
Short-term Strategy: We would turn tactically bearish at resistance at 1.555%, with scope for a move to support at 1.78% thereafter, where we would turn tactically neutral. Resistance below 1.555% is seen at 1.455%, below which we would also turn tactically neutral.
Keep your friends close and your STOPS CLOSER. Finally, a bit further OUT the curve in The Land of the Big 01s, 30yy (DAILY)
GAME PLAN,
Short-term Strategy: We stay tactically bearish, looking for a move to support at 2.17% initially, then 2.32/33%. Resistance stays at 2.03%, below which we would also turn tactically neutral.
On something completely separate and different after what looked to be another day in paradise, comes this gem from The Daily Shot, detailing a relationship between a couple of everyone’s most favorite things, @soberlook first thing this morn
High-multiple growth equities continue to be driven by real rates. Here is the post-IPO portfolio’s correlation with inflation-linked Treasuries.
Finally, in as far as RATES and POSITIONS go (I’m sure the all stars noted above are fully aware of all this and have incorporated into their thought process ?), one of THE authorities on current stance in rates markets offered this earlier today,
>>> UST - Short Side Profits: $78m shorts (13bps profits) vs $36m longs (30bps loss)
Aggressive addition of new short risk over the last week (at more than $30m) driving fast 1m positioning to extremes $55m (>95th percentile) but profits have melted by 50% (to 8bps) as yields find resistance to higher levels above 1.90% and recent shorts now 35% offside.
In contrast in cash/swaps the flows have been broadly contrarian over the week with Banks buying into cheapening while HF largest activity has been in fading the recent flatteners, particularly at the long end with the largest exposure steepeners / long swap swap spreads.
Largest risks? Short positioning is now getting congested (certainly over a 1mth window) and our focus remains squarely on the short side as short profits get squeezed. Meanwhile in medium term (3m) positioning we see a rapid extreme build of shorts in 30y (which also matches the franchise flows) fading recent flattening.
We see risk/return more balanced given extended shorts setup => short / flattening momentum with our focus on the short side - in FV/TY with short profits further squeezed above 119-12/127-30. In 2/10s consensus flatteners but deeply onside above 100bps but lighter setup in the short term => not time to fade.
While the note goes on in some details about where risks are and of the ‘franchise flows’, something else struck me
Are Asian accounts really buying... looking at timezone returns we certainly see recent support during Asian hours for 10y USTs.
(20yr auction yesterday … just sayin’…)
That’s all for now … Until we learn whatever it is that does / doesn’t happen while we slept, here are couple of links thru to market CLOSING COMMENTS
RATES At The Bell HERE and BMO, “Bearish Friday Thesis”
Have a nice evening.