2s10s

As Breakevens Plummet, The Narrative Has Reset

Interest rates are again being allowed to move per market forces--at least in the US—and as rates volatility suppression became the calling card of the QE era, interest rates as the ‘vol trigger’ mechanism within modern market structure / asset management is slowly being reset.

BofA Sees "Head And Shoulders" Everywhere It Looks

Many US dollar and euro crosses, US rates, US 2s10s and US 10y TIPS have just formed or are developing a head and shoulders reversal pattern. The breadth of these patterns suggests the January correction of the 4Q16 trends will continue in 1Q17.

Yen Tumbles After BOJ Boosts Bond Buying

Moments ago, the BOJ decided to avoid any "doubts about its stance" and when it announced the quantities for today's POMO operations, it did not disappoint because whereas it previously bought "only" 410bn yen in the 5-10 year zone, today it increased the amount by 10%, to 450bn, effectively increasing the amount of debt the central bank is monetizing on the long end of the belly.

RBC: "Commence Pain Trade"

Commence 'pain trade.' Expect there to be significant buy-side performance pain today with regards to the below key “long USD”-linked “US reflation” trades (as quoted above) seeing real capitulatory / unwind flows.

Here Are The "Costanza Trades" Of 2017

Ask yourself; what are the trades that make complete sense and all your instincts say are right, and then do the opposite.  Basically what you end up constructing is an out of consensus portfolio and we all know how consensus trades work out in this market.

Visualizing The "Tectonic Shift" In The Markets' Narrative

"...we're at a phase in this UST / developed sovereign bond trade where previously acceptable conditioning (‘buy dips’; ‘get long-er duration because it just keeps working’; ‘never-ending bond inflows will always pause selloffs’ etc) are all being reset in real-time, and this behavioral shift is painful."

US Yield Curve Steepens To 5-Month Highs As Rate-Hike Odds Soar

Since the last FOMC meeting (9/21) the probability of rate hike by December 2016 has soared from under 50% to 76% today (ahead of tomorrow's Fed statement). At the same time, the US yield curve has steepened drastically (with 2s10s up over 20bps to 5-month highs). However, unlike the last 4 Fed meetings, the US yield curve is steepening into the statement...

This Is "Worrisome": The Probability Of A US Recession Surges To 60%, Deutsche Calculates

"This relentless flattening of the curve is worrisome. Given the historical tendency of a very flat or inverted yield curve to precede a US recession, the odds of the next economic downturn are rising. In our probit model, the probability of a recession within the next 12 months has jumped to 60 percent, the highest it’s been since August 2008."

The Message From The Collapsing Yield Curve

The FOMC is tightening monetary policy because Fed officials believe that the US economy is showing more signs of sustainable growth with inflation rising back near their 2% target. Yet the yield curve is warning that the Fed’s moves could slow the US economy and halt the desired upturn in the inflation rate. Most worrying for the Fed's narrative is the fact that the yield curve spread on a weekly basis has been highly correlated with the y/y growth rates in both the forward revenues and forward earnings of the S&P 500. The recent narrowing of the spread isn’t a good omen for either of them.