- Overview: "The Fed’s action should serve to pin Treasury yields below our expectations of fair value for a while longer. However, we doubt that bond markets can continue to rally off this news alone unless this is the first step in a series of additional QE measures."
- US Rates Strategy: "The Federal Reserve will begin purchasing Treasuries to offset the paydowns and maturities in the agency MBS and agency debt portfolio. We review the details and assess the implications."
- Euro Rates Strategy: "While peripheral swap spreads are currently broadly in line with their fundamentals, analysis of countries’ debt trajectories points to the increasing vulnerability of Ireland, Portugal and Spain and the improving outlook for Germany, Finland and the Netherlands."
- Sterling Rates Strategy: "We still believe the gilt curve is too steep versus fundamentals, but the severity of recent price action clearly needs respecting. It seems prudent to keep risk light during this whippy summer trading, but we will remain vigilant to opportunities to buy the long-end if sentiment improves."
- Global Inflation Strategy: "We continue to favour short positions in 5yr, 5yr forward TIPS break-evens, despite the modest extra stimulus from the Fed. In euro, we recommend selling BPTei19 versus OATei20 in a break-even inflation box to capture the relative value and position for upcoming supply."
- JGB Rates Strategy: "We see three sources of deflationary pressure which could impact long-term rates. We recommend adding to long 10yr JGB positions above 1%."
- Global Flow: "Strong demand for both Europe and the US in the week before the FOMC statement. Duration is still being extended."
- New Appendix: "We provide a schedule of coupons and redemptions for each of the EMU-11 countries for 2010-2015. This is in addition to the usual detailed analysis of upcoming coupons, redemptions, supply and net cash flows."
- US Rates Strategy: "The Federal Reserve will begin purchasing Treasuries to offset the paydowns and maturities in the agency MBS and agency debt portfolio. We review the details and assess the implications."
- Euro Rates Strategy: "While peripheral swap spreads are currently broadly in line with their fundamentals, analysis of countries’ debt trajectories points to the increasing vulnerability of Ireland, Portugal and Spain and the improving outlook for Germany, Finland and the Netherlands."
- Sterling Rates Strategy: "We still believe the gilt curve is too steep versus fundamentals, but the severity of recent price action clearly needs respecting. It seems prudent to keep risk light during this whippy summer trading, but we will remain vigilant to opportunities to buy the long-end if sentiment improves."
- Global Inflation Strategy: "We continue to favour short positions in 5yr, 5yr forward TIPS break-evens, despite the modest extra stimulus from the Fed. In euro, we recommend selling BPTei19 versus OATei20 in a break-even inflation box to capture the relative value and position for upcoming supply."
- JGB Rates Strategy: "We see three sources of deflationary pressure which could impact long-term rates. We recommend adding to long 10yr JGB positions above 1%."
- Global Flow: "Strong demand for both Europe and the US in the week before the FOMC statement. Duration is still being extended."
- New Appendix: "We provide a schedule of coupons and redemptions for each of the EMU-11 countries for 2010-2015. This is in addition to the usual detailed analysis of upcoming coupons, redemptions, supply and net cash flows."
Citigroup International Interest Rate Strategist 20100812
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