US Rate & MBS Strategy Weekly

- Treasuries decouple from risk assets: "Over the past six weeks treasury yields have declined sharply even as risk conditions improved, reflecting a growth slowdown even as tail risks recede."
- Neutral on Duration: "Lingering concerns around the Euro area and talk of unconventional easing should keep Treasuries rich to macro-fundamentals."
- QE Redux or QE Unwind: "Implications of the Fed’s gradual portfolio unwind."
- Primary Dealers are Becoming Less Active in Treasury Auctions: "Direct bidder
participation is on the rise. As customer flows through dealers decrease, primary dealers will demand higher yields at auctions to compensate for this increased uncertainty."
- Wait to go long 1y10y vol: "We recommend turning neutral to those that are currently long. We look to go long in the 95-100bp/annum area."
- Stay in up-in-coupon and Ginnie/Fannie MBS: "supply, convexity, investor demand, and carry remain favorable in higher coupons and Ginnies"
- Agency Debt: "We recommend extending from 2-yr to 3-yr bullets to pick up yield and return. 3-mo options look unattractive given high negative convexity."
- US Rate Strategy Model Portfolio: "The portfolio is up 1.0% month-to-date."
Citigroup US Rate MBS Strategy Weekly 20100716

No comments:

Post a Comment