RATES: Barclays Closes 2/10 Flattener at Loss After FOMC
(Bloomberg) -- Trade recommended on March 4 based on “potential for a hawkish surprise” at this week’s FOMC meeting was closed at a 3bp loss, Barclays strategists Rajiv Setia, Anshul Pradhan and Vivek Shukla say in March 17 report.
- “Given the greater sensitivity of the reaction function to the global backdrop,” 2/10 curve “likely to be simply directional, steepening in sell-offs led by global data and flattening in rallies”
- Outright flatteners “no longer look particularly attractive”
- “Dovish surprise” was in “Fed expecting to hike only twice in 2016” vs 4 times projected at Dec. FOMC, with “no catch-up in projected pace versus its prior outlook in 2017, either”
- Short rates have scope to move “modestly higher,” however view is best expressed conditionally via 3m2y 1x2 costless payer spreads struck ATM and ATM+16bp
- 3m3y-3m30y conditional bull flatteners also recommended as positioning data suggest bear steepeners are becoming popular, and U.S. long-term yields “look high in a global context”
Alert:
HALISTER1Source: BFW (Bloomberg First Word)
People Anshul Pradhan (Barclays PLC)
Rajiv Setia (Barclays PLC)
Vivek Shukla (Barclays PLC)
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