Across the Curve

Interesting View From Anonymous Dealer

ONLY ONE REFERENCE TO INTERVENTION WITH A MONETARY FIGURE ATTACHED AND THAT’S HKMA BUYING $300MM U.S. EQUIVALENTS. TAIWAN WAS SAID TO BE IN THE MARKET BUT NO SIZE WAS ATTACHED. THE ECB CONDUCTED A € 5.75 BLN SWAPS WITH THE SWISS NATIONAL BANK TO MAINTAIN LIQUIDITY IN THE SWISS MARKET BUT I AM NOT SURE THERE WERE DOLLARS INVOLVED. RE-INVESTMENT WOULD PROBABLY COME AT THE 2YR NOTE AUCTION TODAY, AT LEAST THAT IS WHAT MANY, MANY DEALERS ARE HOPING FOR AND ESPOUSING. TREASURY YIELDS ARE UNDER PRESSURE AS FULL ON GLOBAL RECOVERY IS NOW WIDELY ACCEPTED WITH THE UNDERSTANDING THE FED WILL OVERSTAY IT’S WELCOME ON THE EASY SIDE. ANIMAL SPIRITS WILL RUN RAMPANT. WE SEE EVERY EFFORT EMPLOYED TO GAIN ANY KIND OF YIELD, WHETHER IN EMERGING MARKETS, CORPORATES, CALLABLES, TAPS AND/OR LONG STRIPS. CASH 10YR YIELD SUPPORT AT 3.45%. SWAPS DESK IS WARNING OF AN ASYMMETRIC CONVEXITY OVERHANG IN THE MBS MARKET, NAMELY HEAVY DURATION…