1 Jul 2013
Flash: Investors positioned for higher US rates – RBS
FXstreet.com (New York) - According to the RBS Research Team, “There are widespread signs that investors are now defensively positioned for US higher rates.”
Medium-term momentum signals are deeply oversold for US rates, trader sentiment is exceptionally bearish on bonds (just 8% bulls for US bond futures), net longs in the JPM survey had their biggest plunge in 2yrs and Put/Call ratios are also at extremes (puts over calls in FV, TY and US futures) not seen since February 2011 when 10's pressed up toward 3.75% - just before a massive rally.
“Given all this, the skew of risk in rates now tilts heavily toward lower rates as we appear to be running out of sellers. A bullish turn in weekly momentum studies will confirm that a bullish correction to lower rates has begun. Cover shorts, be long 2yr notes (stop on a daily close above 0.43% maybe?) and get ready to extend into the belly on dips.” the team adds.
Medium-term momentum signals are deeply oversold for US rates, trader sentiment is exceptionally bearish on bonds (just 8% bulls for US bond futures), net longs in the JPM survey had their biggest plunge in 2yrs and Put/Call ratios are also at extremes (puts over calls in FV, TY and US futures) not seen since February 2011 when 10's pressed up toward 3.75% - just before a massive rally.
“Given all this, the skew of risk in rates now tilts heavily toward lower rates as we appear to be running out of sellers. A bullish turn in weekly momentum studies will confirm that a bullish correction to lower rates has begun. Cover shorts, be long 2yr notes (stop on a daily close above 0.43% maybe?) and get ready to extend into the belly on dips.” the team adds.