Got 20s? Perhaps a 20s30s STEEPENER (as WIN WIN hedge against Z2Z4) ...
PBoC becoming EASIER, Japan STAYING easy (for decades now) and RBNZs plans FOILED by THE VIRUS ...
A view for today — Many continue to express BEARISH RATES VIEWS. They continue to get STOPPED OUT.
This produces popular kids offering LOW CONFIDENCE (yet highly trafficked?) rate calls like this:
BofA’s Gaping 10-Year Bond Call Shows Market’s Uncertain Outlook
… “The market seems to be sitting at the threshold of a major bifurcation of scenarios with material implications for likely rates ranges both near-term and over the current cycle,” strategists led by Bruno Braizinha wrote.
The bank’s rather wide forecast range illustrates just how low conviction in the market has gotten. Traders are torn between crosscurrents that also include an improving labor market and the looming U.S. debt ceiling. …
This seems as helpful as recommending shorts, getting stopped out and then resetting them. At some point you are gonna run OUT of capital (or a seat trading someone ELSES capital)?
Meanwhile, back at the ranch, the rest of us hard working RATES STRATEGISTS generating alpha and returning basis points TO client portfolios and traders having identified flattening trends into and thru various supply / demand dynamics and setups.
Today’s 20yr auction day is NO DIFFERENT especially on heels of what was delivered YESTERDAY — an even UGLIER than ugly G10 SURPRISE! index plunging and now further into NEGATIVE TERRITORY
ReSale TALES MEANly reverting is to be noted:\
Yet, THE Sell Side cognescenti desires cheaper yields and a steeper curve. In fact, a few weeks back the Z2Z4 was deemed a WIN WIN — increased economic activity would surely accelerate the taper and weaker data would then push back near-term hikes ALSO producing a steeper front-end.
The problem is that reality has been not even close. Clinging to these bets has eaten up capital and hedging with a LONG (5s) had been somewhat helpful.
Your welcome?
Today I’d think about 20s which many / most of the brighter bulbs on Wall St seem to agree are going to be seeing issuance CUTS (Nov, Feb) and perhaps a steepening BIAS HERE will … act as an offset (or compliment) to the Z2Z4?
For more, TODAYS 2pg SUMMARY, Technicals, MY VIEW and of course, a few Sell Side Observations (UBS and KETCHUP disinflation) …