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21 Jun 2013
Flash: 10-year US treasuries rebound overnight despite volatility – RBS
FXstreet.com (New York) - According to the RBS Research Team, “Global markets remain highly unsettled as rising volatility 'shakes down' months/years of policy-induced carry trades.”
Moreover, “While we believe that the odds are against the US economy performing well enough to elicit a September tapering (especially given events of the past few weeks), we have little confidence that the positioning imbalances that have pushed rates higher (in emerging markets, MBS, dividend rich stocks, municipal bonds, REITS, etc.) have wrung themselves out.” they warn.
As such, we prefer to ride out the storm in front end Treasuries (2-3-year paper) until there are clearer signs that investor positioning is better geared to a world of less central bank policy activism (US and China), elevated geopolitical risks (Middle East, Turkey, Brazil, etc) and renewed strains within the Eurozone (Greek 10yrs +91bp this morning). In particular, treasuries have rebounded modestly overnight as investor struggles with positioning and higher observed volatility has given rise to fears that higher rates will strain global economies and spark new crises.
Moreover, “While we believe that the odds are against the US economy performing well enough to elicit a September tapering (especially given events of the past few weeks), we have little confidence that the positioning imbalances that have pushed rates higher (in emerging markets, MBS, dividend rich stocks, municipal bonds, REITS, etc.) have wrung themselves out.” they warn.
As such, we prefer to ride out the storm in front end Treasuries (2-3-year paper) until there are clearer signs that investor positioning is better geared to a world of less central bank policy activism (US and China), elevated geopolitical risks (Middle East, Turkey, Brazil, etc) and renewed strains within the Eurozone (Greek 10yrs +91bp this morning). In particular, treasuries have rebounded modestly overnight as investor struggles with positioning and higher observed volatility has given rise to fears that higher rates will strain global economies and spark new crises.