HALISTER1: Barclays Turns Neutral on Outright Long UST 10Y Position

Barclays Turns Neutral on Outright Long UST 10Y Position

(Bloomberg) -- Shift to neutral stance based on reduction in short positioning, easing financial conditions and term premia expectations, Barclays strategists led by Rajiv Setia say in note.
  • Market response to FOMC strengthens case for more regular hikes, while neutral rates and term premia should remain at low levels
  • Market appears “too sanguine” in pricing in just 2.5 hikes this year and 2 next year; therefore, continue to recommend 3s10s curve flatteners
  • Prefer to maintain long duration view via U.S./U.K. convergence trade of buying USD 6m x 30y receivers vs GBP 6m x 30y receivers
    • Trade would benefit from long-end Treasury rally on downward surprise to economic outlook and upwards move in U.K. long-end rates, should Brexit concerns ease on improved economic data
  • NOTE: Barclays entered tactical long UST 10Y trade on Jan. 27 at 2.52% yield; MORE

Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Rajiv Setia (Barclays PLC)

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