Research Roundup

June 30th, 2014 1:26 pm | by John Jansen |

Via Bloomberg:

By Monika Grabek and Erin Roman
June 30 (Bloomberg) — Strategist views on UST yields and
curve spreads from published research:
* BofAML
* Price action after next week’s key data releases
“should reflect positioning and whether the long
duration buying needs have largely been satisfied,”
strategists led by Priya Misra write in June 27 report
* “Remain biased short and in steepeners given current
levels and expections for strong data”; story link
* Barclays
* Bearish bias toward global developed market rates in H2,
especially in the US and UK. In both, the market is
pricing in a much less aggressive hiking cycle than we
forecast, strategist Rajiv Setia writes in June 26
report
* Recommend underweighting intermediate sector against
both the very front end and back end in the US and UK
* BMO
* If 2Q GDP signals an improving economy after weak 1Q
growth, ‘‘it will go a long way to confirming that we’re
at least halfway to fulfilling the Fed’s mandate,”
strategists led by Margaret Kerins write in June 27
report
* “Reluctant to advocate a steepener quite yet” with the
short week ahead, quarter-end and muted inflation
expectations; story link
* FTN
* Lowers 10Y yield trading range to 2.48%-2.62%; previous
range has been 2.55%- 2.68%, FTN strategist Jim Vogel
writes in client note
* Flattening in 5/10 curve in 2Q was driven by 13bps drop
in 5Y yields, 21bps decline in 10Y; “both point to
deteriorating expectations for the economy along with
gradually shifting central bank policies”; story link
* JPMorgan
* Lowers year-end 10Y forecast to 3.00% from 3.20%;
strategists led by Jay Barry cite “sharp contraction”
in 1Q GDP per June 27 report
* Still projects yields higher than current levels at
year-end amid rebound in growth, further labor market
improvement, rich valuations; as such, remains modestly
bearish on duration, still recommends 1/3 steepeners;
story link
* Morgan Stanley
* “We do not feel comfortable chasing the Treasury market
to lower yields. Instead, we maintain a curve flattening
bias and an underweight duration view” in shorter
maturities,  strategist Matthew Hornbach said in June 27
report
* Fed’s outlook on economy is likely to change and
investors “should wait for the Humphrey-Hawkins
testimony to reveal changes to the consensus thinking at
the Fed before positioning for a change in policy
stance”; story link
* Morgan Stanley
* Confusion after Yellen’s “noise” comment, Middle East
tension and contrasting messages from BoE and ECB will
prevent higher yields and a flatter curve in the near-
term, strategist Guneet Dhingra writes in June 27 report
* “We maintain our outright shorts in the front end but
also look to capitalize on some dislocations on the
curve”; story link
* Nomura
* Elevated front-end yields and well-bid long-end yields
create an apparent dichotomy in the UST curve, with same
dynamic in the very front end, strategists George
Goncalves and Stanley Sun write in June 27 report note
* Recommends “getting long 2Y vs 3Y in a mis-weighted
steepener, which has an attractive carry profile,” as
3Y takes brunt of cheapening; story link
* Societe Generale
* With the 2.40%-2.47% range now in sight, “near-term
risk looks bullish again,” though a strong payrolls
number (est. 212k vs 217k in May) will raise pressure,
SocGen strategist Bruno Braizinha writes in June 27
report
* 10Y must break 2.66% before “we can think of a sell-off
toward 2.80%”; story link

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