UST MORNING CALL: ‘Positioning for a Steeper Rates Curve’
(Bloomberg) -- “We see the market positioning for a steeper rates curve, and this is consistent with our longer-term view, but expect Treasuries have room to rally a few more basis points in the near term, punctuated by strength in 10Y futures,” BMO strategist Aaron Kohli says in note.
- “A bearish move to a steeper curve is problematic, because it is necessarily a call on the direction of crude oil and global growth”
- Other observations from strategist morning notes:
- CRT (David Ader): “Monday’s price action has done little to shift our prevailing bias as we continue to track overbought momentum measures and see a need of a correction as yields remain near the recent lows”
- “Overbought momentum can work itself off simply by grinding sideways and not necessarily leading to the sharp correction they imply”
- FTN (Jim Vogel): “Steeper 5s/10s curve provides the opportunity for bond investors today,” and “best single choice for intermediate portfolios is the 6-yr, where the yield pick to 5s is still 20bp, representing more than 35% of the total 5s/10s curve spread”
- Marty Mitchell (independent): “Price action in Treasuries yesterday and again overnight is confirming our suspicion that an upside correction in yields would develop with momentum overbought and with some of the panic buying that took the 10yr to 1.68% last week subsiding, for now”
- Seaport Global (Tom di Galoma): “Key focus over the last few days has been the dislocations brought on by the European government supply and the push higher in crude oil above $40 per barrel”
- “These dislocations will be temporary,” and “in the meantime look for slightly higher rates ahead of supply”
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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