Halister News

(Bloomberg) -- “The biggest question for us now is whether it is safe once again to implement fundamental strategies or whether rates markets are still in the throes of a squeeze,” and “though the influence of other markets (like energy) is undeniable, we still believe that there is a risk that positioning is offsides,” BMO strategist Aaron Kohli says in note.

• “Latest data suggests some closing of shorts in the FV, which is somewhat encouraging, but the rates market as a whole still appears vulnerable to short squeezes”
• “Frenzied pace of buying we saw last week has diminished and may give us an opportunity to see a small reprieve and an accompanying selloff in rates,” and “5s and 10s will be the weakest points on the curve on a relative basis once shorts are fully washed”
• Other observations from strategist morning notes:
• CRT (David Ader): “We are retaining our bearish bias on the Treasury market, although the strong support at 1.80% makes it an obvious key support level in a more significant downtrade this week”
  • “Given the conspicuous absence of corporate deal pricings last week, yields could still face an upward bias based on flow influences”
  • “We’re cognizant that a frozen investment grade new issue market is one of the types of tightening in financial conditions that would get the FOMC worried about the functioning of capital markets more broadly, so a reluctance of borrowers to return to the market this week might change a flow concern into a more systemic policy issue”
• Hilltop Securities (Mark Grant): “These days, there is China and oil and then there is everything else. One you can’t trust, and the other is a forgone conclusion”
  • “Both are troubling and both are causing great volatility in the markets because so much incorrect data is put out about both subjects and because so many vested interests are rigorously plying their wares”