25 Jun 2013
Flash: Treasuries the sanctuary against 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.”
Ultimately, “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.” the team adds.
As such, we prefer to ride out the storm in cash or maybe front end Treasuries (2-years around key support 0.40%) 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 (Spanish 10-years yields above 5%).
Ultimately, “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.” the team adds.
As such, we prefer to ride out the storm in cash or maybe front end Treasuries (2-years around key support 0.40%) 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 (Spanish 10-years yields above 5%).