Potential Secondary Effects of QE

- The QE Effect on Spreads: "The dramatic rise of Treasuries as a percentage of total US Fixed income will slow because of QE Treasury purchases – but it would take a larger program to reverse the growth."
- Indirect Duration Shorts: "Paying in 5y5y and 2s-10s steepeners are the best ways to express a short duration position without explicitly being short. We favor the 2s-10s steepener given the positive carry."
- Duration Supply, Issuance and Fed Purchases: "The supply of duration in the belly is estimated to be $600 billion less in 2010 compared to 2009. We estimate that the Treasury will issue slightly less than $2 trillion in 2011."
- Think 10s will lead 30s?: "Buy low strike 10y receivers and sell low strike 2y and 30y receivers to express the view that 10s will lead 30s in any large rally."
- It's Time to Buy the MBS Basis: "We recommend buying Fannie 4.5s versus paying on 5 yr swaps DV01 neutral; money managers and banks should support MBS at current valuations."
- Agency Debt: "Rolldown returns rule. We recommend that clients swap 8/2017 Treasuries and buy 2/2017 off-the-run agency bullets."
- US Rate Strategy Model Portfolio: "The portfolio is up 0.7% month-to-date."

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