Halister News

(Bloomberg) -- 2Y-5Y yields “are beginning to look low even after accounting for a reasonable risk of a return to the zero lower bound,” Barclays strategists led by Rajiv Setia say in April 7 note.

• “To justify current market pricing, one needs to attach a 40-50% chance” of Fed’s returning to ZLB, which appears at odds with labor market stability and financial conditions
• While 2/5/10 fly is near recent lows, “given the sharp move in the JPY and the accompanying risk-off sentiment, we would wait for stability before shorting the fly or outright intermediate rates”
• Barclays continues to recommend U.S.-German 10Y convergence trade and volatility strangles
• Conditional bull steepener (6m2y-6m3y) offers attractive entry levels because 2s3s curve “has been flattening relentlessly since mid-2015 as global rates have rallied and policy elsewhere has become more accommodative”