We have few economic releases this week. Debt talks in Washington and EU deliberations will drive price discovery for the near term. Major world institutions, uncertain of the outcome for either, continue to seek sanctuary - meaning primarily US debt, the 10 yr last 2.88% from 2.95%, Friday.
Ex quality flight, US debt prices to erode into year end.
US vigor into year end will eclipse that of the EU. Thus a reasonable strategy remains short US debt, long Bunds (last +24). This spread was originally recommended at -4, June/9. We had recommended an exit at +21, July/4, but course of least resistance to remain wider.
Robert Craven
Monday, July 18, 2011
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