Coming into "twist," Sep/21, we advised owning the curve, looking for an expansion (contrary to Fed intent). Instead, 2 - 10 for example, at +178 pre-announcement, contracted to 169 by the end of the day. On Sep/22, it printed +160. Not a satisfactory experience as we were rolled by the mkt crowd so that traders, depending on risk control, would most likely have to realize a loss.
Investors were advised to sit still as nothing had changed. Dynamics for expansion remained in place.
Next, in an Oct/11 update we told clients to continue to look for cheaper prices, US debt, and a more expanded curve, especially 2 - 30. The 10 yr then 2.14%, 2 - 10, +184, 2 - 30, +276. Last, 2.20%, +192, +294.
Most feel still that the consistent right trade on Europe is to position for disappointment. We have disagreed (see our 10/9 piece - Kicking The Can). There will be more US price pressures than expected over the intermediate term; there will be more consumer activity and employment activity than expected over the intermediate term. Thus, the course-of-least-resistance for the US curve to remain steeper, even now. This defines the landscape ahead.
Clients are left to their own devices to best lever this reality.
Robert Craven
Investors were advised to sit still as nothing had changed. Dynamics for expansion remained in place.
Next, in an Oct/11 update we told clients to continue to look for cheaper prices, US debt, and a more expanded curve, especially 2 - 30. The 10 yr then 2.14%, 2 - 10, +184, 2 - 30, +276. Last, 2.20%, +192, +294.
Most feel still that the consistent right trade on Europe is to position for disappointment. We have disagreed (see our 10/9 piece - Kicking The Can). There will be more US price pressures than expected over the intermediate term; there will be more consumer activity and employment activity than expected over the intermediate term. Thus, the course-of-least-resistance for the US curve to remain steeper, even now. This defines the landscape ahead.
Clients are left to their own devices to best lever this reality.
Robert Craven
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