The Max Pain Trade

But "they" can't all be wrong, right?

 

 

And this is not helping...

 

 

 

Not a single economist taking part in a separate survey believes an economic downturn is possible.

“Economists are unwavering in their assessment of where yields are headed in the next half year.

 

Jim Bianco, of Bianco Research, points out in a market comment Tuesday that a survey of 67 economists this month shows every single one of them expects the 10-year Treasury yield to rise in the next six months.

 

The survey, which is done each month by Bloomberg, has been notably bearish for some time now, with nearly everyone expecting rising rates. In March, 97% expected rising rates. In February, 95% expected yields to climb. And in January, 97% held that expectation. Since the beginning of 2009, there have only been a handful of instances where less than 50% expected rates to rise.

 

Still, the fact that every single survey participant is bearish is striking. The last time the survey had that result was in May 2012, when benchmark yields were well below 2%.

 

“Literally there is maybe one economist in the United States straddling the bullish/bearish divide on interest rates. The rest are bearish,” Bianco writes.

 

He adds that a J.P. Morgan client survey shows that the percentage of money manager respondents who said they are underweight Treasurys is the second highest in seven years.

 

This is all the more surprising when we consider that investors went into 2014 thinking yields would rise significantly. Instead, the benchmark yield is lower than when the year started, as the market waded throw subpar economic data, geopolitical tensions, and uncertainty over the Federal Reserve. The 10-year note last traded at a yield of 2.72% on Tuesday, down from just over 3% on Dec. 31.

 

Then again, a separate poll of economists recently showed that exactly zero expect the economy to contract.

 

But when the entire market thinks one thing is about to happen, the opposite outcome is often in store, notes James Camp, managing director of fixed income at Eagle Asset Management. So don’t count out that result with Treasurys, he advises.

 

“It’s the most hated asset class,” says Camp, but Treasurys are some of the best performers year-to-date.”

 

And remember who was telling its clients to sell (them) their bonds?

And just in case you were wondering what else was crowded... VIX shorts...

 

Chart: Bloomberg

Comments

No comments yet! Be the first to add yours.