HALISTER1: UST MORNING CALL: ‘Difficult for Rates to Trend Higher’

UST MORNING CALL: ‘Difficult for Rates to Trend Higher’

(Bloomberg) -- “Until the Fed changes its heightened concern, the fact is it will be difficult for rates to trend higher,” and “I expect rates to be in a range for the next several weeks, for 10yr notes call it 1.65% to 2.00%,” RBS strategist John Briggs says in note.
  • “We are mid-range in curves like 5s30s, but the positive carry aspect and the idea the Fed is showing even more patience, despite financial conditions having recovered, should keep Treasury yield curves steep”
  • Other observations from strategist morning notes:
  • BMO (Aaron Kohli ): “Shortened week in the Treasury market pushes major coupon supply to next week and along with little on the data front, provides limited opportunities for expressing a view”
    • “We expect a week of range trading where the risks of a breakout will likely come from overseas”
  • CRT (David Ader): With Japan out Monday, there will probably be “a bit of weakness at the very start of the week that may, in the context we suggest, offer a buying opportunity,” and “we like 5s and 7s vs. 2s/10s and 2s/30s”
  • FTN (Jim Vogel): “Without inflation worries, the Fed’s altered attire last week would have added another 10-12bp to the UST rally”
    • “Reduction in an aggressive Fed stance can just mean there’s less risk. And, a positively sloped yield curve is the new baseline”
  • Marty Mitchell (independent): “Bond market gets another break from coupon supply this week so Treasury supply will not be a factor on yields,” while “corporate issuance may be, particularly with relative calm settling over markets”
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
John Briggs (RBS Securities Inc)
Aaron Kohli (Bank of Montreal)
David Ader (CRT Capital Group LLC)
Jim Vogel (Ftn Financial)
Marty Mitchell (The Mitchell Market Report LLC)

Topics
UST Morning Call

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