UST MORNING CALL: Front End Is ‘Best Place to Collect Carry’
(Bloomberg) -- “Focus of the markets has shifted to trading around key events as the risk of a potential Fed hike in the next few weeks has faded,” and “we continue to support the view that the front-end will be the best place to collect carry as the Fed stays on hold,” BMO strategist Aaron Kohli says in note.
- “CPI today is one of the reasons that the front-end is facing pressure, as the prospect of a more solid reads on CPI continue will marginally push up the probabilities of a near-term hike by the Fed”
- Other observations from strategist morning notes:
- CRT (David Ader): “While we make a lot of noise over the overbought technical momentum measures, we cannot help but recall seeing those at other extremes recently only to find the market grudgingly reverse while adhering mostly to a non-directional range in the grand scheme of things”
- FTN (Jim Vogel): “Since Tuesday, EU rates have been the dominant influence on short-term UST volatility,” and that is “taking the strength it provided into the 10-yr auction yesterday, reversing Wednesday’s late flattening trade on the yield curve”
- Marty Mitchell (independent): “To the extent that European markets remain under pressure, then we should expect that U.S. yields will show an upward bias” as “the street would prefer to pressure long yields higher into the auction”
- Seaport Global (Tom di Galoma): “Yield curve flattening ahead of the auction is a clear sign most speculators are once again offsides, effectively short long-end duration,” and this should “clear up somewhat today as the auction takes place”
Alert:
HALISTER1Source: BFW (Bloomberg First Word)
People Aaron Kohli (Bank of Montreal)
David Ader (CRT Capital Group LLC)
Jim Vogel (Ftn Financial)
Marty Mitchell (The Mitchell Market Report LLC)
Tom Di Galoma (Seaport Group LLC/The)
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