US Rate & MBS Strategy

- "Stay Short Duration: We expect 10yr yields to climb back towards 3.25%."
- "Strong TIPS Auction: The 10yr TIPS auction was exceptionally strong this week despite rising TIPS issuance and real yields near recent lows. This bodes well for post-auction performance of TIPS."
- "Long-Vol Should Rise Due to Legislation: Supply shock in long-dated vol stemming from legislation could total 20mm bp-vega, and be worth 20- 25bp/annum gradually over 5 years."
- "Go Up-In-Coupon in Agency MBS: With the Fed’s coupon swap program effectively done, high coupons look attractive based on carry, convexity, and supply shifts."
- "Agency Debt: Callable redemptions have been extremely high, and we expect this to continue with 83% of eligible callables to be redeemed in the base case."
- "US Rate Strategy Model Portfolio: The portfolio is currently up 0.5% month-todate."
Citigroup US Rate MBS Strategy Weekly 20100709

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