Long End Flatteners the Way to Go

June 8th, 2016 9:28 am | by John Jansen |

This is an excerpt from a note written by Steve Liddy, a friend and former colleague. It is from a longer piece but the graphs he employs do not translate well on to my very low rent blog. That is my fault and not Steve’s.

Via Steve Liddy:

Not overly scientific here…but, with Yellen taking June off the table and putting July in doubt, I think we are basically waiting on the next month’s payroll data, no? Sure, I guess CPI and and PCE numbers could move things, if they were upside surprises, but last Friday’s number really poured cold water on what could have been an interesting month:
Monday’s Yellen speech
Next week’s FED decision/presser

Yellen’s 6/21 congressional testimony
Now..I’m not sure the latter 2 have much impact, what else can she say?

With that, I think with the ECB now buying Corporates, and German 10y yields about to go negative, the grab for yield is likely to continue and drag the market higher. Corporate supply is down so far this month-though May was a record, with a lot of 30y issuance. The June-July lag between 10y/30y issuance is 5 weeks, where it is normally 4 weeks. Futures OI is up this month, and when looking at how US/WN have performed, you’d have to assume that is buying. Weekly MoF data continues to show that part of the world is buying, and $/¥ basis swaps would indicate they are buying dollars and swapping back. The S&P is within 20pts of its all –time high, which could prompt some quarter end asset allocation moves from the ALM crowd too.

5s30s stopped steepening, and the RSIs (daily here) are neutral. After this week, we get no long end supply for 5 weeks. If you get the chance to sell against the 50d MA-134.2, I think you do that.

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  1. 2 Responses to “Long End Flatteners the Way to Go”

  2. By Steve Liddy on Jun 8, 2016 | Reply

    Here is a link to full piece, if interested or in need of sleep aid.


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