Back on January 23 we first reported [3]that Goldman had opened a new trade whereby it was shorting 10 Year bonds. To wit: As of a few hours ago, Goldman's Francesco Garzarelli has officially told the firm's clients to go ahead and short 10 Year Treasurys via March 2012 futures, with a 126-00 target. While Garzarelli is hardly Stolper, the fact that Goldman is now openly buying Treasurys two days ahead of this week's FOMC statement makes us wonder just how much of a rates positive statement will the Fed make on Wednesday at 2:15 pm. From Goldman: "Since the end of last August, we have argued that 10-yr US Treasury yields would not be able to sustain levels much below 2% in this cycle. Yields have traded in a tight range around an average 2% since September, including so far into 2012. We are now of the view that a break to the upside, to 2.25-2.50%, is likely and recommend going tactically short. Using Mar-12 futures contracts, which closed on Friday at 130-08, we would aim for a target of 126-00 and stops on a close above 132-00." As a reminder, don't do what Goldman says, do what it does, especially when one looks the firm's Top 6 trades for 2012, of which 5 are losing money, and 2 have been stopped out less than a month into the year." Sure enough, we just got this: "On January 23, we recommended going short 10-yr US Treasuries using Mar-12 futures, for a target of 126-00 (roughly corresponding to 2.5% on the 10-yr rate). At yesterday’s close, we hit our stop loss set at a close above 132-00. We reiterate our fundamental conviction in this directional stance, and would look for opportunities to re-engage. With a large structural deficit, rising trailing inflation and a central bank emphasizing job creation, longer-maturity US Treasury bonds do not rest on solid foundations."
Net result: Goldman X + 1, Clients 0... but "looking to opportunities to re-engage "