HALISTER1: UST MORNING CALL: Curve ‘Allows 3 More Rate Increases This Year’

UST MORNING CALL: Curve ‘Allows 3 More Rate Increases This Year’

(Bloomberg) -- “Treasury yield curve allows three more rate increases this year, a direction many economists think will gain support from dot plot shifts released with the FOMC statement,” FTN strategist Jim Vogel says in note.
  • “10-yr UST should retreat to the lower 1.90s on retail sales weakness, while 5s are likely to hold above 1.46% as the Fed outlook is more important to that part of the curve”
  • Other observations from strategist morning notes:
  • BMO (Aaron Kohli): “With several risk markets looking frothy after weeks of gains, the key for the Fed will be to keep June on the table while not tightening financial conditions so much that risk-appetite corrects badly,” and “they could achieve this, since conditions are still historically loose”
  • CRT (David Ader): “We favor a bit of steepening,” and “the illogic here is that the move underway is more corrective in the context of a range and not a bigger directional play”
  • Marty Mitchell (independent): “With the 10yr trading so close to the 2.00% level, it would be best to see it take a peak on the other side of 2.00% before that bounce occurs,” and “we expect that buyers are prepared to add to long exposures behind the 2.00% level, particularly with U.S. yields so attractive compared to what investors can find overseas”
Alert: HALISTER1
Source: 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)

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